Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of July 14,
2011, by and between Workstream Inc., a Canadian corporation (the “Company”),
and First Advantage Offshore Services, Private Limited, an Indian private
limited company (the “Purchaser”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act (as defined below), and/or Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company $1,000,000 of
shares of Class A, Series B Convertible Preferred Stock (the “Series B Stock”).
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,
intending to be legally bound, agree as follows:
ARTICLE I.
DEFINITIONS
1.1       Definitions.  In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
“Action” shall have the meaning ascribed to such term in Section 3.1(j).
“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.
“Closing” means the closing of the purchase and sale of the Shares pursuant to
Section 2.1.
“Closing Date” means the date on which the Closing occurs.
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common shares of the Company, no par value, and any
securities into which such common shares may hereafter be reclassified.
“Disclosure Schedules” means the Disclosure Schedules attached hereto.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(n).
 
 
 

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“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material Adverse Effect” shall have the meaning ascribed to such term in
Section 3.1(c).
“Per Share Purchase Price” shall mean $3.00.
“Person” means an 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 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” means the Registration Rights Agreement, dated
as of the date of this Agreement, among the Company and the Purchaser, in the
form of Exhibit A hereto.
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchaser of the Underlying Common Shares.
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).
“Securities Act” means the Securities Act of 1933, as amended.
“Shares” means shares of the Class A, Series B Convertible Preferred Stock of
the Company issued to the Purchaser pursuant to this Agreement, together with
any such shares issued upon a stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing following the
Closing Date.
“Subscription Amount” means $1,000,000, in United States dollars and in
immediately available funds.
“Subsidiaries” shall mean the subsidiaries of the Company set forth on Schedule
3.1(b).
“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq Stock
Market, the
 
 
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American Stock Exchange, the New York Stock Exchange, the OTC Bulletin Board or
the Pink Sheets.
“Transaction Documents” means this Agreement and the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Underlying Common Shares” means the shares of Common Stock into which any
Shares are converted by and in accordance with their terms.
ARTICLE II.
PURCHASE AND SALE
2.1       Closing.  Subject to the terms and conditions set forth in this
Agreement, on the Closing Date, the Purchaser shall purchase from the Company
and the Company shall issue and sell to the Purchaser a number of Shares equal
to $1,000,000 divided by the Per Share Purchase Price.  The purchase price for
the Shares sold hereunder shall be $1,000,000, to be paid by the Purchaser to
the Company at Closing by wire transfer of immediately available funds to the
account so designated by the Company.  The Closing shall take place at 10:00
a.m., Eastern Time, on the business day immediately following the execution and
delivery of this Agreement by each of the parties hereto at the offices of Cozen
O’Connor, 1900 Market Street, Philadelphia, PA 19103, or such other location as
the parties shall mutually agree.
2.2       Deliveries.
(a)       At the Closing, the Company shall deliver or cause to be delivered to
the Purchaser the following:
(i)         a certificate evidencing the number of Shares purchased by the
Purchaser hereunder;
(ii)        the Registration Rights Agreement, duly executed by the Company; and
(iii)       a certificate of the Secretary of the Company as to the Company’s
Articles of Incorporation, as amended, and By-Laws, as amended.
(b)        At the Closing, the Purchaser shall deliver or cause to be delivered
to the Company the following:
(i)         the Subscription Amount by wire transfer to the account as specified
in writing by the Company; and
(ii)         the Registration Rights Agreement, duly executed by the Purchaser.
2.3       Closing Conditions.
 
 
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(a)        The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i)        the accuracy in all material respects when made and on the Closing
Date of the representations and warranties of the Purchaser contained herein;
(ii)        all obligations, covenants and agreements of the Purchaser required
to be performed at or prior to the Closing Date shall have been performed; and
(iii)        the delivery by the Purchaser of the items set forth in Section
2.2(b) of this Agreement.
(b)        The obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being met:
(i)         the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
(ii)        all obligations, covenants and agreements of the Company required to
be performed at or prior to the Closing Date shall have been performed;
(iii)        the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
(iv)       the Series B Stock Articles of Amendment to the Articles of
Incorporation shall have been duly filed with Industry Canady, and reasonable
evidence of such filing shall have been delivered to the Purchaser; and
(v)         the Company shall have taken all reasonable actions necessary to
cause a designee of the Purchaser, reasonably acceptable to the Board of
Directors of the Company, to be appointed to the Board of Directors of the
Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1        Representations and Warranties of the Company.  The Company hereby
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:
(a)        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 thereunder.  The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company in
connection therewith other than in connection with the Required Approvals.  Each
Transaction Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the
 
 
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Company enforceable against the Company in accordance with its terms except (i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies, and (iii) insofar as indemnification and contribution may be
limited by applicable law.
(b)        Subsidiaries.  All of the majority owned direct and indirect
Subsidiaries of the Company are set forth on Schedule 3.1(b).  Except as set
forth on Schedule 3.1(b), the Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any
Liens.
(c)        Organization and Qualification.  Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise 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.  Each of the Company and the Subsidiaries is duly
qualified to conduct 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 have or reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).
(d)        No Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the Shares and
the consummation by the Company of the other transactions contemplated thereby
do not and will not (i) conflict with or violate any provision of the Company’s
or any Subsidiary’s articles or certificate of incorporation, by-laws or other
organizational or charter documents, or (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 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 affected, or (iii) subject to the Required Approvals,
conflict with or 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), or by which any property or asset of the
Company or a Subsidiary is bound or affected, except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.
(e)        Filings, Consents and Approvals.  The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other
 
 
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Person in connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than (i) filings required pursuant to
Section 4.4 of this Agreement, (ii) the filing with the Commission of a
Registration Statement and any amendments thereto as may be so required pursuant
to the terms of the Registration Rights Agreement, (iii) application(s), if so
required, to the applicable Trading Market for the listing of the Shares for
trading thereon in the time and manner required thereby, and (iv) the filing of
Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required Approvals”).
(f)        Issuance of Shares.  The Shares issued pursuant to this Agreement are
duly authorized and the Shares, 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 imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.  Upon
conversion of the Shares in accordance with their terms, the Underlying Common
Shares will be duly authorized and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents.
(g)        Capitalization.  The capitalization of the Company is as described in
Schedule 3.1(g).  No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.  Except as a result of the purchase
and sale of the Shares and as set forth on Schedule 3.1(g), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock.  The issue and sale of the Shares will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchaser) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities.  All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Shares.  Except as disclosed in the SEC Reports, there
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company’s
stockholders.
(h)        SEC Reports.  The Company has filed all reports required to be filed
by it under the Securities Act and 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, including the exhibits thereto, 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
 
 
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of any such extension.  As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities Act and 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 light of
the circumstances under which they were made, not misleading.
(i)         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 has
had or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not altered its method of accounting, or (iii) 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.  The Company does not have pending
before the Commission any request for confidential treatment of information.
(j)         Litigation.  Except as set forth on Schedule 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents, the Shares or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. There has not been, and to the knowledge of the Company, there
is not pending or contemplated, any investigation by the Commission involving
the Company or, to the knowledge of the Company, any current or former director
or officer of the Company.  The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement filed by
the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k)        Labor Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.
(l)         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)
is in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws applicable to its business except in each case as could not have a Material
Adverse Effect.
(m)       Title to Assets.  Except as described in the SEC Reports, the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property owned by them
 
 
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that is material to the business of the Company and the Subsidiaries and 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 and Liens for the
payment of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties.
(n)        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 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”).
(o)        Sarbanes-Oxley.  The Company is in material compliance with all
provisions of the Sarbanes-Oxley Act of 2002 and all applicable rules and
regulations promulgated by the Commission thereunder that are applicable to it
as of the Closing Date.
(p)        Certain Fees.  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.  The Purchaser shall have no
obligation (other than with respect to its own actions) with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(q)        Private Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Shares by the
Company to the Purchaser or the issuance of Underlying Common Shares.
(r)         Investment Company.  The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Shares, will not be, and will
not be an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.
(s)        Disclosure.  All disclosure provided to the Purchaser regarding the
Company, its business and the transactions contemplated hereby, including the
Disclosure Schedules to this Agreement, furnished by or on behalf of the Company
with respect to the representations and warranties made herein are true and
correct with respect to such representations and warranties and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that the Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.
 
 
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(t)         No Integrated Offering.  Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Shares to be integrated with prior offerings by the Company for
purposes of the Securities Act or any applicable shareholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated.
(u)        Taxes.  Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary have filed all necessary federal, state
and foreign income and franchise tax returns and have paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
(v)        General Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising.
(w)       Foreign Corrupt Practices.  Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has
(i) directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is  in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
3.2        Representations and Warranties of the Purchaser.  The Purchaser
hereby represents and warrants as of the date hereof and as of the Closing Date
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
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The execution,
delivery and performance by the Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate or similar
action on the part of the Purchaser.  Each Transaction Document to which it is a
party has been duly executed by the Purchaser, and when delivered by the
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable
 
 
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remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b)        No Conflicts.  The execution, delivery and performance by the
Purchaser of the Transaction Documents to which it is a party and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents of
the Purchaser or (ii) conflict with, or constitute a default (or an event which
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 of,
any agreement, indenture or instrument to which the Purchaser is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment  or
decree (including federal and state securities laws) applicable to the
Purchaser, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of the Purchaser to perform its obligations hereunder.
(c)        Purchaser Representation.  The Purchaser understands that the Shares
are, and the Underlying Common Shares will be, “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Shares and any Underlying Common Shares as principal
for its own account and not with a view to or for distributing or reselling such
Shares, Underlying Common Shares or any part thereof, has no present intention
of distributing any of such Shares or Underlying Common Shares and has no
arrangement or understanding with any other persons regarding the distribution
of such Shares or Underlying Common Shares.  The Purchaser is acquiring the
Shares hereunder and any Underlying Common Shares in the ordinary course of its
business. The Purchaser does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Shares or any Underlying
Common Shares.
(d)        Purchaser Status.  The Purchaser is an “accredited investor” as
defined in Rule 501(a) of Regulation D under the Securities Act.  The Purchaser
is not required to be registered as a broker-dealer under Section 15 of the
Exchange 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)         General Solicitation.  The Purchaser is not purchasing the Shares as
a result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
(g)        Securities Filings.  The Purchaser acknowledges that it has had
access to and reviewed the information contained in the SEC Reports and have
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
 
 
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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 investment.  The Purchaser 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 Disclosure Schedule 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, 2010; (ii) the Company’s Quarterly
Reports on Form 10-Q for the quarters ended August 31, 2010, November 30, 2010
and February 28, 2011; and (iii) the Company’s proxy statement with respect to
its 2011 annual meeting.
(h)        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 Purchaser to acquire the Shares.
(i)         No Governmental Review.  The Purchaser acknowledges and understands
that no United States federal or state agency or other governmental agency has
passed upon or made any recommendation or endorsement of the Shares or an
investment therein.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1        Transfer Restrictions.
(a)        The Shares and any Underlying Common Shares may be disposed of only
in compliance with state and federal securities laws.  In connection with any
transfer of Shares and Underlying Common Shares, other than pursuant to an
effective registration statement, pursuant to Rule 144 (subject to the Company’s
receipt of routine backup documentation from the Purchaser) or to the Company,
the Company may require the Purchaser to provide to the Company an opinion of
counsel selected by the Purchaser and reasonably acceptable to the Company, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Shares or Underlying Common Shares under the Securities Act.  As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement and the Registration Rights Agreement.
(b)        The Purchaser agrees to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any certificates evidencing the Shares and
any Underlying Common Shares in the following form:
 
 
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THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, HAVE BEEN TAKEN FOR INVESTMENT AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS A REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY APPLICABLE STATE
WITH RESPECT TO THESE SHARES, IS THEN IN EFFECT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT OR THE APPLICABLE STATE SECURITIES LAWS ARE
THEN IN FACT APPLICABLE TO THE OFFER OR SALE.
The Company acknowledges and agrees that the Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Shares and any Underlying
Common Shares to a financial institution that is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and who agrees to be bound by
the provisions of this Agreement and the Registration Rights Agreement and, if
required under the terms of such arrangement, the Purchaser may transfer such
pledged or secured Shares or Underlying Common Shares to the pledgees or secured
parties.  At the Purchaser’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Shares or Underlying
Common Shares may reasonably request in connection with a pledge or transfer of
the Shares or Underlying Common Shares.
(c)        Certificates evidencing the Underlying Common Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)), (i) while
a registration statement (including the Registration Statement) covering the
resale of such Underlying Common Shares is effective under the Securities Act,
or (ii) following any sale of such Underlying Common Shares pursuant to Rule
144, or (iii) if such Underlying Common Shares are eligible for sale under Rule
144(b) (subject to receipt of routine backup documentation demonstrating
eligibility for such rule), 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).  If a
legend is not required pursuant to the foregoing, the Company shall cause its
counsel to issue a legal opinion to the Company’s transfer agent within five (5)
Trading Days following delivery by the Purchaser to the Company or the Company’s
transfer agent (with notice to the Company) of a legended certificate
representing such Underlying Common Shares (endorsed or with stock powers
attached, signatures guaranteed and otherwise in form necessary to effect the
reissuance and/or transfer, if applicable), together with any other deliveries
from the Purchaser as may be reasonably required and deliver or cause to be
delivered to the Purchaser a certificate representing such Shares that is free
from all restrictive and other legends.
(d)        The Purchaser agrees that the removal of the restrictive legend as
set forth in this Section 4.1 is predicated upon the Company’s reliance that the
Purchaser will sell any Shares pursuant to either the registration requirements
of the Securities Act, including any
 
 
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applicable prospectus delivery requirements, or an exemption therefrom, which
Purchaser hereby covenants to do.
4.2        Furnishing of Information.  As long as the Purchaser owns Shares or
Underlying Common Shares, the Company covenants 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.  As long as the Purchaser owns Shares or Warrant Shares and
until the Purchaser is eligible to use Rule 144(b), if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchaser and make publicly available in accordance with Rule 144
such information as is required for the Purchaser to sell the Shares or
Underlying Common Shares under Rule 144.  The Company further covenants that it
will take such further action as the Purchaser may reasonably request, all to
the extent required from time to time to enable the Purchaser to sell such
Shares or Underlying Common Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.
4.3        Integration.  The Company shall not 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 such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4        Securities Laws Disclosure; Publicity.  The Company shall, on or
before 8:30 a.m. Eastern time on the fourth business day following the date
hereof, issue a press release or file a Current Report on Form 8-K, disclosing
the material terms of the transactions contemplated hereby.  The Company and the
Purchaser shall consult with each other in issuing any other press releases with
respect to the transactions contemplated hereby, and neither the Company nor the
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of the Purchaser, or without the prior consent of the Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication.
4.5        Use of Proceeds.  The Company shall use the net proceeds from the
sale of the Shares hereunder for working capital purposes and for the
satisfaction of any portion of the Company’s debt (including but not limited to
the payment of trade payables).
4.6        Indemnification of Purchaser.   Subject to the provisions of this
Section 4.6, the Company will indemnify and hold the Purchaser and its
directors, officers, shareholders, partners, employees and agents (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any the Purchaser Party may suffer or incur as a
result of or relating to (a) any
 
 
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breach of any of the representations, warranties, covenants or agreements made
by the Company in this Agreement or in the other Transaction Documents or (b)
any action instituted against the Purchaser, or any of its Affiliates, by any
stockholder of the Company who is not an Affiliate of the Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings the Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by the Purchaser which constitutes fraud, gross negligence, willful misconduct,
malfeasance or violation of laws).  If any action shall be brought against the
Purchaser Party in respect of which indemnity may be sought pursuant to this
Agreement, the Purchaser Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with counsel of
its own choosing.  Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the Purchaser Party
except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is a material conflict on any material issue between the
position of the Company and the position of the Purchaser Party.  The Company
will not be liable to the Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to the Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by the Purchaser in this Agreement or
in the other Transaction Documents.
4.7        Reservation of Common Stock.  As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Underlying Common Shares
pursuant to this Agreement.
4.8        Listing of Common Stock.  The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market.  The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application all of the
Underlying Common Shares (including only those Underlying Common Shares into
which the Purchaser converted its Shares at the time of such application), and
will take such other action as is necessary to cause the Underlying Common
Shares to be listed on such other Trading Market as promptly as possible.  The
Company will take all action reasonably necessary to continue the listing and
trading of its Common Stock on a Trading Market and will comply in all material
respects with the Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market.
4.9        Fees.  Provided that the transactions contemplated by this Agreement
are consummated and a Closing occurs, the Company shall reimburse the Purchaser
for all reasonable costs and expenses incurred by it or its affiliates in
connection with the transactions contemplated by the Transaction Documents
(including, without limitation, all reasonable legal fees and disbursements in
connection therewith), which amount shall not exceed, in the aggregate
$15,000.  In the event that the transactions contemplated by this Agreement are
not
 
 
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consummated for any reason, each party shall be responsible for its own expenses
and fees incurred by such party in connection with the negotiation, preparation,
execution and delivery and performance of this Agreement.
ARTICLE V.
TERMINATION
5.1        Termination.  In the event that the Closing shall not have occurred
on or before ten (10) business days from the date hereof due to the Company’s or
the Purchaser’s failure to satisfy the conditions set forth in this Agreement
(and a non-breaching party’s failure to waive such unsatisfied condition(s)),
any such non-breaching party at any time shall have the right to terminate this
Agreement without liability of such non-breaching party to any other party upon
the giving of written notice thereof to the other party.  Nothing contained in
this Article V shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or the other
Transaction Documents or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement or the
other Transaction Documents.
ARTICLE VI.
MISCELLANEOUS
6.1        Fees and Expenses.  Except as otherwise set forth in this Agreement,
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.
6.2        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.
6.3        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 (1) Business Day after deposit
with an overnight courier 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:
Workstream Inc.
485 N. Keller Road
Suite 500
Maitland, FL 32751
Telephone:  407-475-5500
 
 
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Facsimile:  (407) 475-5531
Attention:  Chief Executive Officer
With a copy (for informational purposes only) to:
Cozen O’Connor
1900 Market Street
Philadelphia, Pennsylvania 19103
Telephone:  (215) 665-4141
Facsimile:  (215) 665-2013
Attention:  Michael J. Heller, Esquire
If to the Purchaser:
First Advantage Offshore Services, Private Limited
100 Carillon Parkway
St. Petersburg, FL 33716
Telephone:  727.290.1000
Facsimile:  727.521.8852
Attention:  Legal Department         
with a copy (for informational purposes only) to:
Buchanan Ingersoll & Rooney PC
301 Grant Street, 20th Floor
One Oxford Centre
Pittsburgh, PA 15219
Telephone:  (412) 562-8500
Facsimile:  (412) 562-1041
Attention:  Hannah T. Frank
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
6.4        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.
6.5        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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6.6        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
only assign its rights under this Agreement to any Person to whom the Purchaser
assigns or transfers any Shares or Underlying Common Shares, provided such
transferee agrees in writing to be bound, with respect to the transferred Shares
or Underlying Common Shares, by the provisions hereof that apply to the
Purchaser.
6.7        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 as otherwise set forth in Section 4.7.
6.8        Governing Law.  All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflicts of law thereof.  Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the State of Delaware for the adjudication of any
dispute hereunder or 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 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 improper or inconvenient venue for such proceeding.  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 parties hereby waive all rights to a trial by jury.
6.9        Survival.  The representations and warranties herein shall survive
for six (6) months following the Closing and delivery of the Shares.
6.10      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.
6.11      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.
 
 
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6.12      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.
6.13      Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of 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.
6.14      Payment Set Aside.  To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights 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, 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 Page Follows]
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Shares Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
 
WORKSTREAM INC.
 
 
 
By: /s/ John Long                                              
Name:  John Long
Title:  Chief Executive Officer
 
 
FIRST ADVANTAGE OFFSHORE SERVICES, PRIVATE LIMITED
 
 
 
By: /s/ Bret T. Jardine                                        
Name: Bret T. Jardine
Title: General Counsel