OMNIBUS AMENDMENT AND WAIVER NO. 2
This
Omnibus Amendment and Waiver No. 2 (this “Amendment”),
dated
as of March 1, 2007, by and between Conversion Services International, Inc.,
a
Delaware corporation (the “Company”),
CSI
Sub Corp. (DE), a Delaware corporation (“CSI
Sub”),
XxXxxxx Associates, Inc., a Delaware corporation (“XxXxxxx”
and,
together with the Company and CSI Sub, the “Credit
Parties”
and,
each a “Credit
Party”)
and
Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”),
amends (i) that certain Overadvance Side Letter, dated as of February 1, 2006,
by and among the Credit Parties and Laurus (as amended, modified or supplemented
from time to time, the “Overadvance
Side Letter”)
issued
in connection with that certain Security Agreement, dated as of February 1,
2006
by and among the Credit Parties and Laurus (as amended, modified or supplemented
from time to time, the “Security
Agreement”);
(ii)
the Common Stock Purchase Warrant, issued by the Company to Laurus as of August
16, 2004 (as amended, modified or supplemented from time to time, the
“2004 Warrant”)
and
(iii) the Option, issued by the Company to Laurus as of February 1, 2006 (as
amended, modified or supplemented from time to time, the “2006 Option”
and,
together with the Overadvance Side Letter, the Security Agreement, the 2004
Warrant and the other Ancillary Agreements (as defined in the Securities
Agreement), the “Loan
Documents”).
Capitalized terms used but not defined herein shall have the meanings given
them
in the Security Agreement.
WHEREAS,
the Credit Parties and Laurus have agreed to make certain changes to the
Overadvance Side Letter and the Warrants as set forth herein; and
WHEREAS,
the Credit Parties and Laurus have agreed that the Credit Parties shall repay
to
Laurus $2,084,237 of the Overadvance (as defined in the Overadvance Side Letter)
outstanding as of the date hereof; and
WHEREAS,
the Company wishes to issue to Laurus a warrant in the form of Exhibit
A
hereto
(as amended, modified and/or supplemented from time to time, the “2007
Warrant”)
in
repayment of the remaining $500,000 of the Overadvance outstanding as of the
date hereof (after giving effect to the Cash Repayment (as defined below)),
which warrant is exercisable for up to 1,785,714
shares
of the Company’s Common Stock (subject to adjustment as set forth therein) upon
the cashless exercise by the holder thereof for an imputed exercise price of
$0.01 per share in connection with this Amendment; and
WHEREAS,
as of December 29, 2006, (i) XxXxxxxx Associates, Inc. (“XxXxxxxx”)
has
been merged with and into CSI Sub with CSI Sub as the surviving corporation
(the
“XxXxxxxx
Merger”)
and
Integrated Strategies, Inc. (“Integrated”)
has
been merged with and into XxXxxxx with XxXxxxx as the surviving corporation
(the
“Integrated
Merger”
and
together with the XxXxxxxx Merger, the “Mergers”);
and
WHEREAS,
as of December 29, 2006, CSI Sub Corp. II was dissolved (the “Dissolution”
and
together with the Mergers, the “Reorganization”).
NOW,
THEREFORE, in consideration of the above, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto agree as follows:
REPAYMENT
OF OVERADVANCE; ISSUANCE OF WARRANT.
1. Pursuant
to the terms and conditions set forth in this Amendment, on the date hereof,
the
Company shall repay in full the Overadvance outstanding as of the date hereof
(i.e. $2,584,237) by (i) remitting to Laurus $2,084,237 via
wire
transfer in immediately available funds to an account designated in writing
by
Laurus (the “Cash
Repayment”),
and
(ii)
issuance
by the Company to Laurus of the 0000 Xxxxxxx in the form attached hereto as
Exhibit
A
exercisable for up to 1,785,714
shares
of Common Stock of the Company (subject to adjustment as set forth therein),
upon the cashless exercise by the holder thereof for an imputed exercise price
of $0.01 per share (the “Warrant
Payment”).
Upon
consummation of the Cash Repayment and the Warrant Payment, the Overadvance
Side
Letter shall be terminated and shall be of no further force and/or
effect.
CONSENT;
ASSUMPTION AND ADOPTION AGREEMENT.
2. As
of the
Consent Effective Date, Laurus hereby consents (the “Consent”)
to the
Reorganization; provided that on the Consent Effective Date each Credit Party
shall have executed and delivered to Laurus their respective counterpart
signatures to the Assumption and Adoption Agreement in the form attached hereto
as Exhibit
B.
AMENDMENTS
3. Amendment
to 2004 Warrant.
Effective upon the Waiver Effective Date (as defined in Section 6 below),
Section 10 of the 2004 Warrant is hereby deleted in its entirety and the
following new Section 10 inserted in lieu thereof:
“10. Maximum
Exercise.
Notwithstanding anything herein to the contrary, in no event shall the Holder
be
entitled to exercise any portion of this Warrant in excess of that portion
of
this Warrant upon exercise of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unexercised portion of the Warrant or the unexercised or
unconverted portion of any other security of the Holder subject to a limitation
on conversion analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the exercise of the portion of this
Warrant with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its Affiliates of any
amount greater than 9.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates
beneficially own more than 9.99% of the then outstanding shares of Common
Stock). As used herein, the term “Affiliate”
means
any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
person or entity, as such terms are used in and construed under Rule 144 under
the Securities Act. For purposes of the second preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of
the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such sentence. For any
reason at any time, upon written or oral request of the Holder, the Company
shall within one (1) business day confirm orally and in writing to the Holder
the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision
of
no less than sixty-one (61) days prior written notice to the Company and (y)
shall automatically become null and void following notice to the Company upon
the occurrence and during the continuance of an Event of Default (as defined
in
the Security Agreement), except that at no time shall the Company be obligated
to issue any shares of Common Stock pursuant to the terms of this Warrant,
the
Security Agreement or any other Ancillary Agreement (as defined in the Security
Agreement) if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue pursuant
to the terms of this Warrant, the Security Agreement or any other Ancillary
Agreement without violating the rules or regulations of the Principal Market
(the “Exchange
Cap”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules
or
regulations of the Principal Market for issuances of Common Stock in excess
of
such amount.
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4. Amendment
to 2006 Option.
Effective upon the Waiver Effective Date (as defined in Section 5 below),
Section 1.1 of the 2006 Option is hereby deleted in its entirety and the
following new Section 1.1 inserted in lieu thereof:
“1.1 Number
of Shares Issuable upon Exercise.
From
and after the date hereof, the Holder shall be entitled to receive, upon
exercise of this Option in whole or in part, by delivery of an original or
fax
copy of an exercise notice in the form attached hereto as Exhibit A (the
“Exercise Notice”), shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4. Notwithstanding anything herein to the contrary, in
no
event shall the Holder be entitled to exercise any portion of this Warrant
in
excess of that portion of this Warrant upon exercise of which the sum of (1)
the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein)
and
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 9.99% of the then outstanding shares
of
Common Stock (whether or not, at the time of such exercise, the Holder and
its
Affiliates beneficially own more than 9.99% of the then outstanding shares
of
Common Stock). As used herein, the term “Affiliate”
means
any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
person or entity, as such terms are used in and construed under Rule 144 under
the Securities Act. For purposes of the second preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of
the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such sentence. For any
reason at any time, upon written or oral request of the Holder, the Company
shall within one (1) business day confirm orally and in writing to the Holder
the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision
of
no less than sixty-one (61) days prior written notice to the Company and (y)
shall automatically become null and void following notice to the Company upon
the occurrence and during the continuance of an Event of Default (as defined
in
the Security Agreement), except that at no time shall the Company be obligated
to issue any shares of Common Stock pursuant to the terms of this Warrant,
the
Security Agreement or any other Ancillary Agreement (as defined in the Security
Agreement) if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue pursuant
to the terms of this Warrant, the Security Agreement or any other Ancillary
Agreement without violating the rules or regulations of the Principal Market
(the “Exchange
Cap”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules
or
regulations of the Principal Market for issuances of Common Stock in excess
of
such amount.
3
5. The
Company and Laurus agree that, upon execution of this Amendment by the Company
and Laurus, the Company will be deemed to have received notice from Laurus
of
Laurus’ waiver of the 4.99% conversion limitation set forth in Section 10 of
each of the Warrants and Option, which waiver shall become effective on the
75th
day
following the date hereof (the “Waiver
Effective Date”).
MISCELLANEOUS
6. Effective
Date.
This
Amendment, other than in respect of the Consent, shall be effective (the
“Effective
Date”)
on the
first date upon which (i) each Credit Party and Laurus shall have executed
and
the Credit Parties shall have delivered to Laurus their respective counterpart
signatures to this Amendment. The Consent shall be effective (the “Consent Effective
Date”)
on the
first date upon which (i) the Credit Parties shall have repaid, jointly and
severally, to Laurus $2,084,237- via wire transfer in immediately available
funds to an account designated in writing by Laurus to effect the Cash Payment,
(ii) the Company shall have executed before a witness, witnessed and delivered
to Laurus the 2007 Warrant to effect the Warrant Payment, and (iii) the Credit
Parties shall each have executed and delivered to Laurus their respective
counterpart signatures to the Assumption, Adoption and Consent
Agreement.
7. Representations,
Warranties and Covenants.
Each
Credit Party hereby represents and warrants to Laurus that after giving effect
to this Amendment: (i) on the date hereof, all representations, warranties
and
covenants made by such Credit Party in connection with the Loan Documents
(including, without limitation, in respect of the 0000 Xxxxxxx) are true,
correct and complete; and (ii) on the date hereof, all of each Credit Party’s
covenant requirements set forth in the Loan Documents have been
met.
8. No
Waiver of Other Defaults.
Upon
the occurrence and during the continuance of any further Events of Default
that
may occur after date of this Agreement, Laurus may, at its election, exercise
any rights and remedies authorized by the Loan Documents and/or applicable
law.
Laurus’ rights and remedies under the Loan Documents shall be cumulative. Laurus
shall have all other rights and remedies not inconsistent herewith or therewith
as provided by law or in equity. No exercise by Laurus of one right or remedy
shall be deemed an election, and no waiver by Laurus of any Event of Default
on
the part of the Company shall be deemed a continuing waiver. No delay by Laurus
shall constitute a waiver, election, or acquiescence by it.
9. Further
Assurances.
The
Company will take such other actions as Laurus may reasonably request from
time
to time to accomplish the objectives of this Agreement.
4
10. Registration
Rights.
If at
any time after the date hereof there is not an effective registration statement
covering the shares of Common Stock of the Company issuable upon exercise of
the
2004 Warrant, the 2006 Warrant or the 2007 Warrant (collectively, the
“Shares”)
and
the Company shall determine to prepare and file with the Securities and Exchange
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of 1933, as amended (the
“Securities
Act”),
of
any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any
entity or business or equity securities issuable in connection with a stock
option or other employee benefit plans, then the Company shall include in such
registration statement all of such Shares, subject to customary underwriter
cutbacks applicable to all holders of registration rights.
The
Company’s registration obligations pursuant to this paragraph shall continue
until the earlier of: (a) the date when all of the Shares have been sold
publicly by Laurus pursuant to an effective registration statement; or (b)
the
date when all of the Shares may be sold without restriction pursuant to Rule
144(k) under the Securities Act.
11. No
Other Changes.
Except
as specifically set forth in this Amendment, there are no other amendments,
modifications or waivers to the Term Notes or, Purchase Agreements, and all
of
the other forms, terms and provisions of the Term Notes and the Purchase
Agreements remain in full force and effect.
12. Limited
References.
From
and after the Amendment Effective Date, all references to the Term
Note, the
Purchase Agreement, the 2004 Warrant and the 2006 Option shall be deemed to
be
references to the Term Note, the Purchase Agreement, the 2004 Warrant and the
2006 Option as modified hereby.
13. Governing
Law; Assignments; Counterparts.
This
Amendment shall be binding upon the parties hereto and their respective
successors and permitted assigns and shall inure to the benefit of and be
enforceable by each of the parties hereto and their respective successors and
permitted assigns. THIS
AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE
LAW OF THE STATE OF NEW YORK.
This
Amendment may be executed in any number of counterparts, each of which shall
be
an original, but all of which shall constitute one instrument.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF,
each
Credit Party and Laurus has caused this Amendment to be signed in its name
effective as of this 1st day of March, 2007.
| CONVERSION SERVICES INTERNATIONAL, INC. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxx | |
|
Name:
Xxxxx Xxxxxx
Title:
President and CEO
|
||
| CSI SUB CORP. (DE) | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxx | |
|
Name:
Xxxxx Xxxxxx
Title:
President and CEO
|
||
| XXXXXXX ASSOCIATES, INC. | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxx | |
|
Name:
Xxxxx Xxxxxx
Title:
President and CEO
|
||
| LAURUS MASTER FUND, LTD. | ||
| |
|
|
| By: | /s/ Xxxxx Grin | |
|
Name:
Xxxxx Grin
Title:
Director
|
||
6
EXHIBIT
A
2007
WARRANT
7
EXHIBIT
B
ASSUMPTION,
ADOPTION AND CONSENT AGREEMENT
8
