EXHIBIT 4.2
NOTE AND WARRANT AMENDMENT AGREEMENT
This Note and Warrant Amendment Agreement (this "AGREEMENT") is made and
entered into as of January 12, 2004, by and among Workstream Inc., a Canadian
corporation (the "COMPANY"), Crestview Capital Fund, L.P. ("Fund"), Crestview
Capital Fund II, L.P. ("FUND II") and Crestview Capital Offshore Fund, Inc.
("OFFSHORE").
RECITALS:
WHEREAS, on May 14, 2002, the Company sold to Fund, Fund II and Offshore
8% Senior Subordinated Convertible Notes dated May 14, 2002 in the principal
amounts of Eight Hundred Sixty Thousand Dollars ($860,000), Five Hundred Twenty
Thousand Dollars ($520,000) and Twenty Thousand Dollars ($20,000), respectively,
(hereinafter referred to as the "FUND NOTE," the "FUND II NOTE" and the
"OFFSHORE NOTE," respectively, and collectively, as the "CONVERTIBLE NOTES");
WHEREAS, in connection with the sale of the Convertible Notes, the Company
issued to each of Fund, Fund II and Offshore Common Stock Purchase Warrants
dated May 14, 2002 (hereinafter referred to as the "FUND WARRANT," the "FUND II
WARRANT" and the "OFFSHORE WARRANT," respectively, and collectively, as the
"WARRANTS"); and
WHEREAS, the parties hereto desire to amend (a) the Convertible Notes to
provide for the automatic conversion of the outstanding amounts owed under the
Convertible Notes into shares of the Company's Common Stock (the "COMMON STOCK")
at a conversion price of $1.50 per share and (b) the Warrants to adjust the
exercise price to $2.00 per share of Common Stock.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual agreements and covenants set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. Amendments to Convertible Notes. Each of the Convertible Notes are
hereby amended as follows:
(a) New Section 2.4. A new section is hereby added as follows to the
Convertible Notes:
"2.4. Automatic Conversion.
(a) Notwithstanding anything contained herein to the
contrary, on January 12, 2004 (the "AUTOMATIC CONVERSION DATE"), the entire
outstanding principal of and accrued interest on this Note as of the Automatic
Conversion Date shall automatically convert, without any action by or on behalf
of the Company or the Holder, into that number of shares of Common Stock
determined by dividing the entire outstanding principal of and accrued interest
on this Note as of the Automatic Conversion Date by $1.50 (the "NEW CONVERSION
PRICE"). No fractional shares of Common Stock shall be issued upon conversion.
In lieu of any fractional shares of Common Stock to which the Holder would
otherwise be entitled, Company shall pay the Holder cash in an amount equal to
such fraction multiplied by the New Conversion Price.
(b) Promptly following the Automatic Conversion Date,
the Holder shall surrender this Note to the Company for cancellation. Promptly
following delivery of this Note from the Holder to the Company for cancellation,
the Company shall deliver or cause to be delivered to Holder, in Holder's name,
certificates representing the number of fully paid and non-assessable shares of
Common Stock into which this Note has been converted in accordance with the
provisions of Section 2.4(a). Subject to the foregoing provisions hereof, such
conversion shall be deemed to have occurred on the Automatic Conversion Date so
that Holder shall be treated for all purposes as having become the record holder
of such shares of Common Stock at such time.
(c) On the Automatic Conversion Date, this Note shall be
deemed paid in full and, except as set forth in Section 2.4(b), the Company
shall have no further obligations hereunder.
(d) The shares of Common Stock issuable upon conversion
of this Note may not be offered, sold or otherwise transferred unless (i) they
first shall have been registered under the Act and applicable state securities
laws or (ii) the Company shall have been furnished with an opinion of legal
counsel (in form, substance and scope reasonably acceptable to the Company) to
the effect that such sale or transfer is exempt from the registration
requirements of the Act. Each certificate for shares of Common Stock issuable
upon conversion of this Note that have not been so registered and that have not
been sold pursuant to an exemption that permits removal of the applicable
legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE REGISTERED
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES
AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS."
2. Amendments to Warrants. Each of the Warrants are hereby amended as
follows:
(a) Purchase Price. The words "$3.70 per Warrant Share" contained in
the first paragraph of the Warrants shall be replaced with the words "$2.00 per
Warrant Share".
(b) Deleted Sections. Each of Sections 6(c)(i), 6(c)(ii), 6(c)(iv),
6(d), 6(e), 6(f) and 6(h) of the Warrants is hereby amended by deleting such
Section in its entirety and replacing it with "[Intentionally Omitted]."
3. Acknowledgements.
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(a) Each of the Company and Fund acknowledges and agrees that (i) as
of the date hereof, the entire outstanding principal amount and accrued interest
owed by the Company to Fund under the Fund Note is One Hundred Sixty-One
Thousand Two Hundred Fifty Dollars ($161,250), (ii) as a result of the
amendments herein to the Fund Note, the Company will issue One Hundred Seven
Thousand Five Hundred (107,500) shares of Common Stock on the Automatic
Conversion Date to Fund in satisfaction of the Fund Note and (iii) as of the
date hereof, the aggregate number of shares of Common Stock issuable upon
exercise of the Fund Warrant is One Hundred Ninety-One Thousand Seven Hundred
Sixty-Seven (191,767) at an exercise price of $2.00 per share.
(b) Each of the Company and Fund II acknowledges and agrees that (i)
as of the date hereof, the entire outstanding principal amount and accrued
interest owed by the Company to Fund II under the Fund II Note is Ninety-Seven
Thousand Five Hundred Dollars ($97,500), (ii) as a result of the amendments
herein to the Fund II Note, the Company will issue Sixty-Five Thousand (65,000)
shares of Common Stock on the Automatic Conversion Date to Fund II in
satisfaction of the Fund II Note and (iii) as of the date hereof, the aggregate
number of shares of Common Stock issuable upon exercise of the Fund II Warrant
is One Hundred Fifteen Thousand Nine Hundred Fifty-Two (115,952) at an exercise
price of $2.00 per share.
(c) Each of the Company and Offshore acknowledges and agrees that
(i) as of the date hereof, the entire outstanding principal amount and accrued
interest owed by the Company to Offshore under the Offshore Note is Three
Thousand Seven Hundred Fifty Dollars ($3,750), (ii) as a result of the
amendments herein to the Offshore Note, the Company will issue Two Thousand Five
Hundred (2,500) shares of Common Stock on the Automatic Conversion Date to
Offshore in satisfaction of the Offshore Note and (iii) as of the date hereof,
the aggregate number of shares of Common Stock issuable upon exercise of the
Offshore Warrant is Four Thousand Four Hundred Sixty (4,460) at an exercise
price of $2.00 per share.
(d) Each of Fund, Fund II and Offshore authorizes the Company to
execute or cause the execution of one or more termination statements terminating
and removing any liens, security interests or other encumbrances that Fund, Fund
II, Offshore or their agent may have on the assets of the Company or any of its
subsidiaries. Each of Fund, Fund II and Offshore covenants and agrees to execute
or cause the execution of any and all documents necessary to terminate and
remove any liens, security interests or other encumbrances that Fund, Fund II,
Offshore or their agent may have on the assets of the Company or any of its
subsidiaries.
4. Representations and Warranties. Each party hereby represents and
warrants to the other parties hereto as follows:
(a) Such party has not assigned, transferred, conveyed, pledged or
encumbered any of its rights or delegated any of its obligations under any of
the Convertible Notes or Warrants to any person or entity.
(b) The execution, delivery and performance of this Agreement has
been duly authorized by all requisite action and will not violate or conflict
with its charter or other governing documents or with any statute, order,
governmental rule or regulation, or agreement, instrument or other document by
which it or its properties are bound.
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(c) This Agreement constitutes the legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance or other similar
laws or equitable principles affecting generally the enforcement of creditors'
rights.
5. Confirmation of Convertible Notes and Warrants. Except as expressly
amended by this Agreement, each Convertible Note and each Warrant shall continue
in full force and effect in accordance with the provisions thereof. All
references in the Convertible Notes to this Agreement or words of similar import
shall refer to the Convertible Notes as amended by this Agreement. All
references in the Warrants to this Agreement or words of similar import shall
refer to the Warrants as amended by this Agreement.
6. Governing Law. This Agreement shall be governed by the internal laws of
the State of New York, without regard to conflicts of law principles.
7. Severability. In case any provision of this Agreement is held by a
court of competent jurisdiction to be invalid or unenforceable, such provision
shall be adjusted rather than voided, if possible, so that it is enforceable to
the maximum extent possible, and the validity and enforceability of the
remaining provisions of this Agreement will not in any way be affected or
impaired thereby.
8. Counterparts. 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.
9. 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
all of the parties hereto 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.
10. Headings. 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.
11. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. Any
attempted assignment of this Agreement in violation of the terms of this Section
shall be void without legal effect. None of the parties hereto may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the other parties hereto.
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IN WITNESS WHEREOF and intending to be legally bound hereby, the parties
hereto have executed this Note and Warrant Amendment Agreement as of the date
first written above.
WORKSTREAM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
CRESTVIEW CAPITAL FUND, L.P.
By: /s/Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Managing Director
CRESTVIEW CAPITAL FUND II, L.P.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Managing Director
CRESTVIEW CAPITAL OFFSHORE FUND, INC.
By: /s/ Xxxxxx Xxxx
--------------------------------
Name: Xxxxxx Xxxx
Title: Managing Director
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