Exhibit 10.18
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (the
"Agreement") is effective as of May 14, 2002 by and among Workstream Inc., a
Canada corporation, with offices at 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxx,
Xxxxxx X0X-0X0 (the "Company"), and the purchasers listed on the Schedule of
Purchasers attached hereto as Exhibit A (collectively, the "Purchasers").
RECITALS
WHEREAS the Company, Sands Brothers Venture Capital III LLC and Sands Brothers
Venture Capital IV LLC entered into and consummated a securities purchase
agreement (the "Securities Purchase Agreement") as of the 18th day of April,
2002.
AND WHEREAS the parties hereto wish to amend and restate the Securities Purchase
Agreement by entering into this Agreement.
AND WHEREAS the Purchasers desire to purchase from the Company, and the Company
desires to sell to the Purchasers, (a) up to $4 million of principal amount of
8% Senior Subordinated Secured Convertible Notes (the "Notes") as specified on
the Schedule of Purchasers to this Agreement, in the form of Exhibit B annexed
hereto and (b) warrants (the "Warrants") to purchase shares of common stock of
the Company, in the form of Exhibit C annexed hereto.
AGREEMENT
In consideration of the mutual promises contained herein and other good
and valuable consideration, receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1. Purchase and Sale of Notes; Issuance of Warrant.
(a) Purchase and Sale of Notes. Subject to the terms and conditions of
this Agreement, each Purchaser agrees to purchase at the Closing (hereinafter
defined) and the Company agrees to sell and issue to each Purchaser a Note in
the principal amount specified on the Schedule of Purchasers to this Agreement.
The purchase price of the Note shall be equal to 100% of the principal amount of
such Note. The Note shall be convertible into Series A Convertible Preferred
Shares containing the terms and provisions set forth in the Articles of
Amendment of Workstream, Inc., ("Articles of Amendment") in the form of Exhibit
D annexed hereto.
(b) Issuance of Warrant. Concurrently with the purchase and sale of the
Notes, the Purchasers shall be issued the Warrants in the amounts set forth on
the Schedule of Purchasers to this Agreement.
(c) Closings: Delivery. The initial purchase and sale of the Notes and
the issuance of the Warrants (such Notes and Warrants to be referred to
collectively as the "Securities") shall take place at the offices of Xxxxxxx
Xxxxxx & Xxxx P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000, at 10:00 a.m., on
April 18, 2002, or at such other time and place as the Company and the
Purchasers mutually agree upon, orally or in writing (which time and place shall
be designated as the "Initial Closing"). Subsequent closings, if any, may take
place at the offices of Xxxxxxx Krooks & Xxxx P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx,
XX 00000 at 10:00 a.m., on or before July 31, 2002 (which time and place are
designated as the "Subsequent Closing" or, together with the Initial Closing,
the "Closing"). At the Closing, the Company shall deliver to each Purchaser,
against payment of the purchase price by check or by wire transfer to the
Company's bank account or the exchange of existing promissory notes, the Note to
be purchased by such Purchaser and the Warrant to be issued to such Purchaser.
2. Representations and Warranties of the Company. Except as set forth
on the Schedule of Exceptions attached as Schedule 1 hereto, the Company hereby
represents and warrants to each Purchaser as follows:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated validly existing and in good standing under the laws of Canada
and has all requisite corporate authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted. The
Company is duly qualified or licensed as a foreign corporation and is in good
standing in all jurisdictions where the nature of its business or property makes
such qualification or licensing necessary and where the failure to do so would
have a material adverse effect on its condition (financial or otherwise),
business, properties, assets, liabilities (including contingent liabilities),
results of operations or current prospects of the Company and its Subsidiaries,
taken as a whole (hereinafter a "Material Adverse Effect"). The Company has made
available to the Purchasers copies of its Articles of Incorporation and Bylaws.
Said copies are true, correct and complete and contain all amendments through
the Closing Date. The Company does not currently own or control, directly or
indirectly, any interest in any other corporation, partnership, limited
liability company, association or other business entity. The Company is not a
participant in any joint venture or similar arrangement.
(b) Corporate Power. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, the
Note, the Warrant, the Security Agreements in the form attached hereto as
Exhibit E (the "Security Agreement"), (the Note, the Warrant and the Security
Agreement are hereinafter collectively referred to as the "Related Agreements")
and to consummate any other transactions contemplated by the terms of this
Agreement and the Related Agreements, and to carry out and perform its
obligations under the terms of this Agreement and the Related Agreements.
(c) Authorization, Enforcement. (i) The execution and delivery of the
Agreement and Related Agreements by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (ii) the
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Agreement and Related Agreements have been duly executed and delivered by the
Company, and at the Closing shall constitute valid and binding obligations of
the Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(d) Capitalization
(i) Capital Stock. The authorized capital stock of the Company
consists or will consist, upon the filing of the Articles of Amendment to the
Company's Certificate of Incorporation ("Articles of Amendment"), of an
unlimited number of shares of Common Stock of which 16,572,551 will be issued
and outstanding immediately prior to the Closing. The outstanding shares of
capital stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws.
(ii) Reserved Capital Stock. The Company has reserved a
sufficient number of shares of Common Stock for issuance upon conversion of the
Notes and exercise of the Warrants. The Company will also reserve a sufficient
number of shares of Common Stock for issuance upon conversion of the Series A
Preferred at the time such Series A Preferred is authorized. The Company has
presently reserved 2,500,000 shares of its Common Stock for issuance to
employees, consultants or directors under its 2001 Amended and Restated Stock
Option Plan, of which 1,886,869 shares are subject to outstanding options and
613,131 shares remain available for issuance under such Plan.
(iii) Obligations With Respect to Capital Stock. Except as set
forth in this Agreement, no options, warrants, subscriptions or purchase rights
of any nature to acquire from the Company shares of capital stock or other
securities are authorized, issued or outstanding, nor is the Company obligated
under its charter documents or under any agreement by which the Company is bound
to issue shares of its capital stock or other securities, except as contemplated
by this Agreement. There are no restrictions on the transfer of shares of
capital stock of the Company other than those imposed by relevant federal and
state securities laws and as otherwise contemplated by this Agreement. To the
Company's best knowledge except as provided for in the Articles of Amendment,
there are no agreements, understandings, trusts or other collaborative
arrangements or understandings concerning the voting of the capital stock of the
Company.
(d) Solvency. The Company is solvent after giving effect to the
transactions contemplated by this Agreement and the Related Agreements.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the Related Agreements by the Company and the consummation by the
Company of the transactions contemplated herein do not and will not (i) violate
any provision of the Company's Charter or Bylaws, (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, mortgage, deed of
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trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company is a party, (iii) create or impose a lien, charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound, or (iv) result in a violation
of any federal, state, local or other foreign statute, rule, regulation, order,
judgment or decree (including any federal or state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its subsidiaries are bound or
affected, except, in all cases, for such conflicts, defaults, termination,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for violations which singularly
or in the aggregate do not and will not have a Material Adverse Effect. The
Company is not required under any federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or the
Related Agreements, or issue and sell the Securities in accordance with the
terms hereof (other than any filings which may be required to be made by the
Company with the SEC or state securities administrators ); provided, however,
that for purpose of the representations made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Purchasers herein.
(f) Financial Statements. The financial statements of the Company
comply as to form in all material respects with applicable accounting
requirements under GAAP or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). For purposes hereof, the term "GAAP" shall mean the
United States Generally Accepted Accounting Principles as those conventions,
rules and procedures are determined by the Financial Accounting Standard Board
and its predecessor agencies.
(g) No Undisclosed Liabilities. The Company has no liabilities,
obligations, claims or losses (whether liquidated or unliquidated, secured or
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP which are not disclosed in the Schedule
of Exceptions, other than those incurred in the ordinary course of the Company's
business since such date and which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the Company.
(h) Compliance with Law. The Company has all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted by it
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
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(i) Taxes. The Company has filed all Tax Returns which it is required
to file under applicable laws; all such Tax Returns are true and accurate in all
material respect, and have been prepared in compliance with all applicable laws;
except as set forth in Schedule of Exceptions the Company has paid all Taxes due
and owing by it (whether or not such Taxes are required to be shown on a Tax
Return) and has withheld and paid over to the appropriate taxing authorities all
Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since December 31,
2001, the charges, accruals and reserves for Taxes with respect to the Company
(including any provisions for deferred income taxes) reflected on the books of
the Company are to its knowledge adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company is or may be subject to
taxation by that jurisdiction. Except as set forth in the Schedule of
Exceptions, there are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other review
has been received by the Company from any foreign, federal, state or local
taxing authority. Except as set forth in Schedule 2(h), there are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant to
Section 7121 of the Internal Revenue Code or any predecessor provision thereof
or any similar provision of state, local or foreign law; and (B) has not agreed
to or is required to make any adjustments pursuant to ' 481 (a) of the Internal
Revenue Code or any similar provision of state, local or foreign law by reason
of a change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such adjustment
or change in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
For purposes of this Section 2(h):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
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"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
(j) SEC Reports. The Company has filed in a timely manner all documents
that the Company was required to file under the Exchange Act during the 12
months preceding the date of this Agreement and such documents complied as to
form in all material respects with the SEC's requirements as of their respective
filing dates, and the information contained therein as of the date thereof did
not contain 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 light of the circumstances under which they were made not misleading.
(k) Books and Records. The records and documents of the Company
accurately reflect in all material respects the information relating to the
business of the Company, the location and collection of its assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company.
(l) Securities Laws. The Company has complied and will comply with all
applicable federal and state securities laws in connection with the offer,
issuance and sale of the Securities hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Securities or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchasers), so
as to bring the issuance and sale of the Securities under the registration
provisions of the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection with
the offer or sale of the Shares.
(m) Changes. Since December 31, 2001 (the "Statement Date"), there has
not been:
(i) any change in the assets, liabilities, financial condition
or operating results of he Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
(ii) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the business, properties,
prospects or financial condition of the Company;
(iii) any waiver or compromise by the Company of a valuable
right or of a material debt owed to it;
(iv) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and that is not material to the business, properties,
prospects or financial condition of the Company;
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(v) any change or amendment to a contract or arrangement by
which the Company or any of its assets or properties is bound or subject which
is materially adverse to the assets, properties, financial condition, operating
results or business of the Company as such business is presently conducted,
including any change or amendment to any of the governing documents of the
Company (including the Articles of Incorporation and Bylaws of the Company, each
as amended), except as contemplated hereunder;
(vi) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(vii) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(viii) any resignation or termination of employment of any
officer or key employee of the Company; and the Company, to its knowledge, is
not aware of any impending resignation or termination of employment of any such
officer or key employee;
(ix) any mortgage, pledge, transfer of a security interest in
or lien created by the Company with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(x) any loans or guarantees made by the Company to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(xi) any declaration, setting aside or payment or other
distribution in respect to any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any or such stock by the
Company;
(xii) any transaction entered into by the Company not in the
ordinary course of its business;
(xiii) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of the Company;
(xiv) any amount borrowed by the Company;
(xv) any material change in the manner of business or
operations of the Company;
(xvi) to the Company's knowledge, any other event or condition
of any character that might materially and adversely affect the business,
properties, prospects or financial condition of the Company; or
(xvii) any arrangement or commitment by the Company to do any
of the things described in this Section 2(m).
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(n) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the Company's knowledge, threatened against, the
Company or its properties (not, to the Company's knowledge against any of the
officers or directors of the Company) before any court, arbitrator or
governmental agency which, in the case of actions, suits, proceedings or
investigations pending or threatened against officers or directors of the
Company, either in any case or in the aggregate, might result in any material
adverse change in the business or financial condition of the Company or any of
its properties or assets, or in any material impairment of the right or ability
of the Company to carry on its business as now conducted or as proposed to be
conducted, or in any material liability on the part of the Company, and none
which questions the validity of the Agreements, the right of the Company to
enter into the Agreements or consummate the transactions contemplated hereby or
thereby, or any action taken or to be taken in connection herewith, nor is the
Company aware that there is a reasonable basis for any of the foregoing. The
foregoing includes, without limitation, actions suits, proceedings or
investigations pending or threatened and known to the Company involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
former employers. The Company is not a party or subject to the provisions of any
order writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit proceeding or investigation by the
Company currently pending or which the Company intends to initiate. To the
Company's knowledge, neither the Company, nor any officer, key employee or 5%
shareholder of the Company, in his/her/its capacity as such, is in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or any other government agency which might, either
individually or in the aggregate, result in any material adverse changes in the
assets, condition or affairs of the Company, financially or otherwise.
(o) Brokers or Finders; Other Offers. Except for fees payable to Sands
Brothers & Co., Ltd. ("Sands Brothers") as hereinafter set, the Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finder's fees or agent's
commissions or any similar charges in connection with this Agreement and the
Related Agreements.
(p) Disclosure. The Company has fully provided each Purchaser with all
the information which such Purchaser has requested for deciding whether to
acquire the Securities and all information which the Company believes is
reasonably necessary to enable such Purchaser to make such decision. No
representation or warranty of the Company contained in this Agreement and the
Related Agreements and the exhibits and schedules attached hereto and thereto,
any certificate furnished or to be furnished to Purchasers at the Closing or
other written information furnished to the Purchasers or their counsel in
connection with the transactions contemplated by this Agreement and the Related
Agreements contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
There is no fact known to the Company that has not been disclosed herein or in
the Related Agreements, or in any other agreement, document or written statement
furnished by the Company to the Purchasers in connection with the transactions
contemplated hereby and thereby which is specific to the Company, as opposed to
the industry in which the Company operates, and which materially adversely
affects or is reasonably likely to materially and adversely affect the business,
properties, assets or financial condition of the Company
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(q) No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its employees, officers or directors or their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees, officers and directors not in excess of
$10,000, nor is the Company contemplating such indebtedness as of the date of
this Agreement. To the Company's knowledge, none of said employees, officers or
directors, or any member of their immediate families, is directly or indirectly
indebted to the Company (other than in connection with purchases of the
Company's stock) or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship or any firm or corporation which competes with the
Company nor is the Company contemplating such indebtedness as of the date of
this Agreement, except that employees, officers, directors and/or shareholders
of the Company may own stock in publicly traded companies (not in excess of 1%
of the outstanding capital stock thereof) which may compete the Company. To the
Company's knowledge, no employee, shareholder, officer or director, or any
member of their immediate families, is, directly or indirectly, in whole or in
part, any material tangible or intangible property that the Company uses or
contemplates using in the conduct of its business. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm,
corporation or entity.
(r) Intentionally Omitted.
(s) Intellectual Property. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, domain names,
copyrights, source code, trade secrets, information, proprietary rights and
processes, and any applications or registrations therefore, and all inventions,
technical drawings, technology, know-how, processes, formulas, algorithms,
computer software programs, documentation, and all other tangible and intangible
information or material in any form, used or currently proposed to be used in
its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. Except as set forth in
the Schedule of Exceptions, there are no outstanding options, licenses or
agreements of any kind relating to the foregoing, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, domain names, copyrights,
source code, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, domain names, copyrights, source code, or trade secrets or
other proprietary rights of any other person or entity, nor is the Company aware
of any basis therefor.
(t) Customers and Suppliers. No customer or supplier that was
significant to the Company during the period covered by the Financial Statements
or that has been significant to the Company thereafter, has terminated,
materially reduced or, to the Company's knowledge, threatened to terminate or
materially reduce its purchases from or provision of products or services to the
Company, as the case may be.
(u) Shareholders Meeting. On or before December 31, 2002, the Company
will take appropriate action to hold a shareholders meeting to authorize the
Series A Convertible Shares which authorization shall delete the 20% cap as
currently provided in the Articles of Amendment.
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3. Representations and Warranties of the Purchasers. Each Purchaser
hereby severally and not jointly represents and warrants to the Company that:
(a) Purchase Entirely for Own Account. The Securities to be acquired by
the Purchaser will be acquired for investment for the Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. The Purchaser
has not been formed for the specific purpose of acquiring the Securities.
(b) Knowledge. The Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities.
(c) Restricted Securities. The Purchaser understands that the
Securities have not been, and will not be, registered under the Securities Act
of 1933, as amended (the "Securities Act"), by reason of a specific exemption
from the registration provisions of the Securities Act which depends upon, among
other things, the bona fide nature of the investment intent and the accuracy of
the Purchaser's representations as expressed herein. The Purchaser understands
that the Securities are "restricted securities" under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the Purchaser must
hold the Securities indefinitely unless the Securities are registered with the
Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation to register or
qualify the Securities for resale. The Purchaser further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements relating to the
Company which are outside of the Purchaser's control, and which the Company is
under no obligation and may not be able to satisfy.
(d) No Public Market. The Purchaser understands that no public market
now exists for the Securities and that the Company has made no assurances that a
public market will ever exist for the Securities.
(e) Legends. The Purchaser understands that the Securities may bear one
or all of the following legends.
(i) "THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND HAS BEEN ACQUIRED FOR INVESTMENT AND NOT FOR A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE
AFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT.
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(ii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the Securities represented by the
certificate so legended.
(f) Accredited Investor. The Purchaser is an accredited investor as
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4. Conditions of the Purchaser's Obligations at Closing. The
obligations of each Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations and Warranties. The representations and warranties
of the Company contained in Section 2 hereof shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
(b) Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall be obtained and effective as of the
Closing.
(c) Performance; Proceedings and Documents. The Company shall have
performed and complied with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing and all corporate and other proceedings in connection with
the transactions contemplated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchasers, and
they shall have received all such counterpart original and certified or other
copies of such documents as they may reasonably request.
(d) Compliance Certificate. The Company shall deliver to each Purchaser
at the Closing a certificate dated as of the Closing and signed on its behalf by
one of the Company's executive officers certifying that the conditions specified
in Sections 4(a), (b) and (c) have been fulfilled.
(e) Secretary's Certificate. The Purchasers shall have received a
certificate of the Secretaries or Assistant Secretaries of the Company (the
"Bring-Down Certificate"), in form and substance satisfactory to the Purchasers,
certifying as follows:
(i) that attached thereto are true and complete
copies of the Articles and Bylaws of the Company;
(ii) that attached thereto are true and complete
copies of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance of
this Agreement and the Related Documents, instruments and
certificates required to be executed by it in connection
herewith and approving the consummation of the transactions in
the manner contemplated hereby including, but not limited to,
the authorization and issuance of the Notes and Warrants;
11
(iii) the names and true signatures of the officers
of the Company signing this Agreement and all other documents
to be delivered in connection with this Agreement;
(f) Security Agreement. The Company and each Purchaser shall have
entered into the Security Agreement.
(g) Opinion of Company Counsels. The Purchasers shall have received
from Xxxxxx-Xxxxxxxxx, Xxxx & XxXxxxxxx LLP, counsel for the Company, an
opinion, dated as of the Closing, in the form attached to this Agreement as
Exhibit F. The Purchasers shall also receive from Cozen X'Xxxxxx, US counsel to
the Company, an opinion dated as of the Closing, to the effect that the
Workstream USA Guaranty (as hereinafter defined) is enforceable and that the
sale of the Notes and Warrants are exempt from the registration requirements of
the Securities Act.
(h) Delivery of Note and Warrant. Each Purchaser shall have received
the Note and Warrant which such Purchaser is purchasing hereunder.
(i) Additional Documents. The Company shall have delivered to each
Purchaser such additional documents relating to the transactions contemplated by
this Agreement as each Purchaser may reasonably request.
(j) UCC-1 Financing Statements. The Company shall execute and deliver
appropriate UCC-1 Financing Statements and such other documents that Purchasers
may reasonably request to enable Purchasers to perfect their security interest
in the Collateral (as defined in the Security Agreement), which financing
statements shall be filed by the Company on the date of the Closing in the
Company's jurisdiction of incorporation and promptly after the Closing the
Company shall provide written evidence that such filings have been made in such
manner.
(k) Board of Directors. The Company's Bylaws shall provide for a Board
of Directors of a minimum of three (3) and a maximum of nine (9) directors. As
of the Closing, the Board shall be comprised of six directors. In addition, a
seat shall be available for a nominee of the holders of the Notes.
(l) Sands Brothers Agreements. The following agreement shall be
executed by the Company and Sands Brothers:
(i) Agency Agreement, pursuant to which Sands Brothers shall
be paid a placement fee equal to 10% of the principal amount of the Notes and
10% warrant coverage with respect to sales to all Purchasers located by Sands
Brothers. The foregoing fees shall be paid concurrent with each Closing.
(m) Guaranty. The Company's wholly-owned subsidiary Workstream USA,
Inc. shall execute a deliver a Guaranty in the form annexed as Exhibit G hereto
("Workstream USA Guaranty").
12
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations and Warranties. The representations and
warranties of each Purchaser contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing.
(b) Performance of Obligations. Each Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by him/her/it on or before the Closing, and such
Purchaser shall have delivered payment to the Company in respect of its purchase
of such Purchaser's Note.
(c) Qualifications. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Securities pursuant to this Agreement shall be obtained and effective as
of the Closing.
6. Miscellaneous.
(a) Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
(b) Governing Law; Jurisdiction. This Agreement and all acts
and transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of New York, without giving effect to principles of conflicts of
law. In addition, the parties herto agree that (i) any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
exclusively in the New York State Supreme Court, County of New York or in the
United States District Court for the Southern District of New York, (ii) waive
any objection which the parties may have now or hereafter based upon forum non
conveniens or to the venue of any such suit, action or proceeding, and (iii)
irrevocably consent to the jurisdiction of the New York State Supreme Court,
County of New York and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. FURTHER, THE
PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS
AGREEMENT AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSS CLAIM
ASSERTED IN ANY SUCH ACTION.
(c) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
13
(d) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) Survival. The warranties, representations, agreements and
covenants of the Company contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.
(f) Notices. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the U.S. mail as
certified or registered mail with postage prepaid, if such notice is addressed
to the party to be notified as such party's address as set forth below or as
subsequently modified by written notice.
(g) Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least 51% of the principal amount of the Notes; provided that in the event
the Sands Entities' (as hereinafter defined) participation falls below 51% of
the principal amount of the Notes ("Majority Holders"), the term Majority
Holders shall always be inclusive of the Sands Entities. Any amendment or waiver
affected in accordance with this Section 6(g) shall be binding upon the
Purchasers, each future holder of the Notes, and the Company.
(h) Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then such provision
shall be excluded form this Agreement, and the balance of the Agreement shall be
enforceable in accordance with its terms.
(i) Entire Agreement. This Agreement, and the documents
referred to herein, constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements existing between the parties hereto are expressly canceled.
(j) Exculpation Among Purchasers. Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no other Purchaser nor their
respective controlling persons, officers, directors, partners, agents, or
employees, shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the Securities.
(k) Representation . Each party hereto acknowledges that by
Sands Brothers Venture Capital III LLC and Sands Brothers Venture Capital IV
LLC, together with their affiliates (the "Sands Entities" and each, a "Sands
Entity") retained Xxxxxxx Xxxxxx & Xxxx P.C. ("LKR") to represent the Sands
Entities in connection with the Agreement and the Related Agreements, that the
Sands Entities' interests may not necessarily coincide with the interests of the
other Purchasers, and that each Purchaser has consulted with, or has had the
opportunity to consult with, its own legal counsel and has not relied on LKR for
legal counsel in connection with this transaction.
14
(l) Expenses. The Company and each Purchaser shall pay their
respective costs and expenses incurred with respect to the negotiation,
execution, delivery and performance of this Agreement; provided, however, that
if the Closing is effected, the Company shall, at the Closing, pay LKR, counsel
to the Sands Entities an amount not to exceed $25,000 for legal fees and
expenses.
(m) Subsequent Closings. Sands Brothers shall have the right
to ten (10) day prior written notice with respect to any Subsequent Closings
that may be held hereunder and such notice shall contain the names of additional
Purchasers and their investment amount.
[signatures on following pages]
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY:
WORKSTREAM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman and CEO
SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT
PURCHASERS:
Sands Brothers Venture Capital III LLC
By: SB Venture Capital Management III LLC, Manager
By: /s/ Xxxxxx Xxxxx
-------------------------------------------------
Name: Xxxxxx Xxxxx
-----------------------------------------------
(print)
Title: Manager
----------------------------------------------
Address:
Sands Brothers Venture Capital IV LLC
By: SB Venture Capital Management III LLC, Manager
By: /s/ Xxxxxx Xxxxx
-------------------------------------------------
Name: Xxxxxx Xxxxx
-----------------------------------------------
(print)
Title: Manager
----------------------------------------------
Address:
EXHIBIT A
SCHEDULE OF PURCHASERS
Closing (April 18, 2002)
Name and Address of Purchaser Principal of Notes Warrants
Sands Brothers Venture Capital III LLC $1,000,000 200,000
Sands Brothers Venture Capital IV LLC $500,000 100,000
EXHIBIT B
FORM OF
8% SENIOR SECURED PROMISSORY NOTE
EXHIBIT C
FORM OF
WARRANT
EXHIBIT D
FORM OF
ARTICLES OF AMENDMENT
EXHIBIT E
FORM OF
SECURITY AGREEMENT
EXHIBIT F
FORM OF
LEGAL OPINIONS
EXHIBIT G
FORM OF
GUARANTY
SCHEDULE 1
SCHEDULE OF EXCEPTIONS
