COMMON STOCK PURCHASE WARRANT
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THIS WARRANT MAY NOT BE
SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY
ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE,
TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.
WORKSTREAM INC.
WARRANT CERTIFICATE
THIS WARRANT CERTIFICATE (the "Warrant Certificate") certifies that for
value received, ____________ (the "Holder"), is the owner of this warrant (the
"Warrant"), which entitles the Holder to purchase at any time on or before the
Expiration Date (as defined below) _____________________ (__________) shares
(the "Warrant Shares") of fully paid non-assessable shares of the common stock
(the "Common Stock"), of WORKSTREAM INC., a Canadian corporation (the
"Company"), at a purchase price of $3.50 per Warrant Share (the "Purchase
Price"), in lawful money of the United States of America by bank or certified
check, subject to adjustment as hereinafter provided. This Warrant is issued
pursuant to the Securities Purchase Agreement (the "Purchase Agreement") dated
of even date among the Company and the Purchasers thereunder, including the
Holder. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement.
1. WARRANT; PURCHASE PRICE.
This Warrant shall entitle the Holder to purchase the Warrant Shares at
the Purchase Price. The Purchase Price and the number of Warrant Shares
evidenced by this Warrant Certificate are subject to adjustment as provided in
Article 6.
2. EXERCISE; EXPIRATION DATE.
(a) This Warrant is exercisable, at the option of the Holder, at any time
after the date of issuance and on or before the Expiration Date (as defined
below) by (i) delivering to the Company written notice of exercise (the
"Exercise Notice"), stating the number of Warrant Shares to be purchased
thereby, accompanied by bank or certified check payable to the order of the
Company for the Warrant Shares being purchased provided, however, that this
Warrant may not be converted prior to the effectiveness of a registration
statement with the Securities Exchange Commission for the Warrant Shares. Within
ten (10) business days of the Company's receipt of the Exercise Notice
accompanied by the consideration for the Warrant Shares being purchased, the
Company shall issue and deliver to the Holder a certificate representing the
Warrant Shares being purchased. In the case of exercise for less than all of the
Warrant Shares represented by this Warrant Certificate, the Company shall cancel
this Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate for the balance of such Warrant Shares.
(b) Expiration. The term "Expiration Date" shall mean 5:00 p.m., Ottawa
time, on December 31, 2008 or if such date shall in the Province of Ontario
shall be a holiday or a day on which banks are authorized to close, then 5:00
p.m., Ottawa time, the next following day which in the Province of Ontario is
not a holiday or a day on which banks are authorized to close.
3. RESTRICTIONS ON TRANSFER.
(a) Restrictions. This Warrant, and the Warrant Shares or any other
security issuable upon exercise of this Warrant may not be assigned,
transferred, sold, or otherwise disposed of unless (i) there is in effect a
registration statement under the Act covering such sale, transfer, or other
disposition or (ii) the Holder furnishes to the Company an opinion of counsel,
reasonably acceptable to counsel for the Company, to the effect that the
proposed sale, transfer, or other disposition may be effected without
registration under the Act, as well as such other documentation incident to such
sale, transfer, or other disposition as the Company's counsel shall reasonably
request.
(b) Legend. Any Warrant Shares issued upon the exercise of this Warrant
shall bear the following or similar legend:
"The shares evidenced by this certificate were issued upon exercise of a
Warrant and may not be sold, transferred, or otherwise disposed of in the
absence of an effective registration under the Securities Act of 1933 (the
"Act") or an opinion of counsel, reasonably acceptable to counsel for the
Company, to the effect that the proposed sale, transfer, or disposition
may be effectuated without registration under the Act."
4. RESERVATION OF SHARES.
The Company covenants that it will at all time reserve and keep available
out of its authorized Common Stock, solely for the purpose of issuance upon
exercise of this Warrant, such number of shares of Common Stock as shall then be
issuable upon the exercise of this Warrant. The Company covenants that all
shares of Common Stock which shall be issuable upon exercise of this Warrant
shall be duly and validly issued and fully paid and non-assessable and free from
all taxes, liens, and charges with respect to the issue thereof.
5. LOSS OR MUTILATION.
If the Holder loses this Warrant, or if this Warrant is stolen, destroyed
or mutilated, the Company shall issue an identical replacement Warrant upon the
Holder's delivery to the Company of a customary agreement to indemnify the
Company for any losses resulting from the issuance of the replacement Warrant.
2
6. ANTI-DILUTION PROVISIONS.
(a) Stock Dividends, Subdivisions and Combinations. If at any time the
Company shall:
(i) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend payable in, or other distribution of,
additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock,
then (A) the number of shares of Common Stock for which this Warrant is
exercisable into immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Common Stock which a record holder of
the same number of shares of Common Stock for which this Warrant is exercisable
into immediately prior to the occurrence of such event would own or be entitled
to receive after the happening of such event, and (B) the Purchase Price shall
be adjusted to equal (x) the current Purchase Price immediately prior to the
adjustment multiplied by the number of shares of Common Stock for which this
Warrant is exercisable into immediately prior to the adjustment divided by (y)
the number of shares of Common Stock for which this Warrant is exercisable into
immediately after such adjustment.
(b) Certain Other Distributions. If at any time the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(i) cash (other than a cash dividend payable out of earnings or
earned surplus legally available for the payment of dividends under the laws of
the jurisdiction of incorporation of the Company),
(ii) any evidences of its indebtedness, any shares of stock of any
class or any other securities or property of any nature whatsoever (other than
cash, convertible securities or additional shares of Common Stock), or
(iii) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, convertible
securities or additional shares of Common Stock),
then (A) the number of shares of Common Stock for which this Warrant is
exercisable into shall be adjusted to equal the product of the number of shares
of Common Stock for which this Warrant is exercisable into immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the current
Purchase Price per share of Common Stock at the date of taking such record and
(y) the denominator of which shall be such current Purchase Price minus the
amount allocable to one share of Common Stock of any such cash so distributable
and of the fair value (as determined in good faith by the Board of Directors of
the Company) of any and all such evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase
rights so distributable, and (B) the Purchase Price shall be adjusted to equal
(x) the Purchase Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable into immediately prior to the adjustment
divided by (y) the number of shares of Common Stock for which this Warrant is
exercisable into immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 6(b) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 6(a).
3
(c) Issuance of Additional Shares of Common Stock.
(i) If at any time the Company shall issue or sell any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock less than the current Purchase Price at the time the
additional shares of Common Stock are issued or sold, then (A) the current
Purchase Price shall be reduced to a price determined by dividing (x) an amount
equal to the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing current
Purchase Price, plus (2) the consideration, if any, received by the Company upon
such issue or sale, by (y) the total number of shares of Common Stock
outstanding immediately after such issue or sale; and (B) the number of shares
of Common Stock for which this Warrant is exercisable into shall be adjusted to
equal the product obtained by multiplying the current Purchase Price in effect
immediately prior to such issue or sale by the number of shares of Common Stock
for which this Warrant is exercisable into immediately prior to such issue or
sale and dividing the product thereof by the current Purchase Price resulting
from the adjustment made pursuant to clause (i).
(ii) If the Company shall at any time issue or sell any additional
shares of Common Stock in exchange for consideration in an amount per additional
share of Common Stock less than the Current Market Price (as hereinafter
defined) at the time the additional shares of Common Stock are issued or sold,
then (A) the number of shares of Common Stock for which this Warrant is
exercisable into shall be adjusted to equal the product obtained by multiplying
the number of shares of Common Stock for which this Warrant is exercisable into
immediately prior to such issue or sale by a fraction (x) the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
issue or sale, and (y) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus the number
of shares which the aggregate offering price of the total number of such
additional shares of Common Stock would purchase at the then Current Market
Price; and (B) the current Purchase Price as to the number of shares for which
this Warrant is exercisable into prior to such adjustment shall be adjusted by
multiplying such current Purchase Price by a fraction (a) the numerator of which
shall be the number of shares for which this Warrant is exercisable into
immediately prior to such issue or sale; and (b) the denominator of which shall
be the number of shares of Common Stock purchasable immediately after such issue
or sale.
4
(iii) "Current Market Price" means, in respect of any share of
Common Stock on any date herein specified, if there shall not then be a public
market for the Common Stock, the value per share of Common Stock at such date as
is determined in the good faith judgment of the Board of Directors of the
Company, or if there shall then be a public market for the Common Stock, the
average of the daily market prices for 10 consecutive business days ending on
the business day prior to such date. The daily market price for each such
business day shall be (i) the last sale price on such day on the principal stock
exchange on which such Common Stock is then listed or admitted to trading, (ii)
if no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange, the average of the last reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Association of Securities Dealers Automated Quotation System or the
National Quotation Bureau, Inc., (iv) if neither such corporation at the time is
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the NASD selected mutually by the holders of at least
50% of the aggregate principal amount of the Warrants and the Company or, if
they cannot agree upon such selection, as furnished by two such members of the
NASD, one of which shall be selected by holders of at least 50% of the aggregate
principal amount of the Warrants and one of which shall be selected by the
Company. (iv) If at any time the Company shall issue or sell any additional
shares of Common Stock in exchange for consideration in an amount per additional
shares of Common Stock which is less than the current Purchase Price and Current
Market Price at the time the additional shares of Common Stock are issued or
sold, the adjustment required under Section 6(c)(i) or 6(c)(ii) shall be made in
accordance with the formula contained therein which results in the lower current
Purchase Price following such adjustment. The provisions of paragraphs 6(c)(i)
and 6(c)(ii) shall not apply to any issuance of additional shares of Common
Stock for which an adjustment is provided under Section 6(a) or 6(b). No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable into shall be made under paragraph 6(c)(i) or 6(c)(ii) upon the
issuance of any additional shares of Common Stock which are issued pursuant to
the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any purchase or exchange rights in any convertible
securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
convertible securities (or upon the issuance of any warrant or other rights
therefore) pursuant to Section 6(d) or Section 6(e).
(d) Issuance of Warrants or Other Rights. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any warrants or other rights to subscribe for or purchase any
additional shares of Common Stock or any convertible securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such convertible
securities shall be less than the current Purchase Price or the Current Market
Price in effect immediately prior to the time of such issue or sale, then the
number of shares for which this Warrant is exercisable into and the current
Purchase Price shall be adjusted as provided in Section 6(c) on the basis that
the maximum number of additional shares of Common Stock issuable pursuant to all
such warrants or other rights or necessary to effect the conversion or exchange
of all such convertible securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefore, if any, as of the date of the actual issuance of such warrants or
other rights. If the maximum number of additional shares of Common Stock
necessary to effect the conversion or exchange is indeterminable as a result of
a conversion or exercise price which adjusts over time (whether based on the
Market Price of the Common Stock or otherwise), the determination of adjustments
pursuant to this Section 6(d) shall be determined at the time of actual
conversion or exercise of such convertible securities and an adjustment shall be
made only upon actual conversions or exchanges which are below the Purchase
Price or the Current Market Price on the date of issuance of such Convertible
Securities. No further adjustments of the current Purchase Price shall be made
upon the actual issue of such Common Stock or of such convertible securities
upon exercise of such warrants or other rights or upon the actual issue of such
Common Stock upon such conversion or exchange of such convertible securities.
5
(e) Issuance of Convertible Securities. If at any time the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a distribution of, or shall in any manner (whether directly or
by assumption in a merger in which the Company is the surviving corporation)
issue or sell, any convertible securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange shall be less
than the current Purchase Price or Current Market Price in effect immediately
prior to the time of such issue or sale, then the number of shares of Common
Stock for which this Warrant is exercisable into and the current Purchase Price
shall be adjusted as provided in Section 6(c) on the basis that the maximum
number of additional shares of Common Stock necessary to effect the conversion
or exchange of all such convertible securities shall be deemed to have been
issued and outstanding and the Company shall have received all of the
consideration payable therefore, if any, as of the date of actual issuance of
such convertible securities. If the maximum number of additional shares of
Common Stock necessary to effect the conversion or exchange is indeterminable as
a result of a conversion or exercise price which adjusts over time (whether
based on the Market Price of the Common Stock or otherwise), the determination
of adjustments pursuant to this Section 6(e) shall be determined at the time of
actual conversion or exercise of such convertible securities and an adjustment
shall be made only upon actual conversions or exchanges which are below the
Purchase Price or the Current Market Price on the date of issuance of such
Convertible Securities. No further adjustment of the number of shares of Common
Stock for which this Warrant is exercisable into and the current Purchase Price
shall be made under this Section 6(e) upon the issuance of any convertible
securities which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefore, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 6(d). No further adjustments of the number of shares of
Common Stock for which this Warrant is exercisable into and the current Purchase
Price shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such convertible securities.
6
(f) Superseding Adjustment.
(i) If, at any time after any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable into and the current Purchase
Price shall have been made pursuant to Section 6(d) or Section 6(e) as the
result of any issuance of warrants, other rights or convertible securities, then
(x) such warrants or other rights, or the right of conversion or exchange in
such other convertible securities, shall expire, and all or a portion of such
warrants or other rights, or the right of conversion or exchange with respect to
all or a portion of such other convertible securities, as the case may be shall
not have been exercised, or (y) the consideration per share for which shares of
Common Stock are issuable pursuant to such warrants or other rights, or the
terms of such other convertible securities, shall be increased solely by virtue
of provisions therein contained for an automatic increase in such consideration
per share upon the occurrence of a specified date or event, then any such
previous adjustments to this Warrant shall be rescinded and annulled and the
additional shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation.
(ii) Upon the occurrence of an event set forth in Section 6(f) above
there shall be, a recomputation made of the effect of such warrants, other
rights or options or other convertible securities on the basis of: (a) treating
the number of additional shares of Common Stock or other property, if any,
theretofore actually issued or issuable pursuant to the previous exercise of any
such warrants or other rights or any such right of conversion or exchange, as
having been issued on the date or dates of any such exercise and for the
consideration actually received and receivable therefor, and (b) treating any
such warrants or other rights or any such other convertible securities which
then remain outstanding as having been granted or issued immediately after the
time of such increase of the consideration per share for which shares of Common
Stock or other property are issuable under such warrants or other rights or
other convertible securities; whereupon a new adjustment of the number of shares
of Common Stock for which this Warrant and the current Purchase Price shall be
made, which new adjustment shall supersede the previous adjustment so rescinded
and annulled.
(g) Other Provisions Applicable to Adjustments. The following provisions
shall be applicable to the making of adjustments of the number of shares of
Common Stock for which this Warrant is exercisable into and the current Purchase
Price provided for in this Section 6:
(i) Computation of Consideration. To the extent that any additional
shares of Common Stock or any convertible securities or any warrants or other
rights to subscribe for or purchase any additional shares of Common Stock or any
convertible securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such additional shares of Common Stock or convertible
securities are offered by the Company for subscription, the subscription price,
or, if such additional shares of Common Stock or convertible securities are sold
to underwriters or dealers for public offering without a subscription offering,
the initial public offering price (in any such case subtracting any amounts paid
or receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any additional shares of Common Stock or any convertible
securities or any warrants or other rights to subscribe for or purchase such
additional shares of Common Stock or convertible securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, convertible securities, warrants or other rights, as the case may
be. The consideration for any additional shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Company for issuing such warrants or
other rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any additional
shares of Common Stock issuable pursuant to the terms of any convertible
securities shall be the consideration received by the Company for issuing
warrants or other rights to subscribe for or purchase such convertible
securities, plus the consideration paid or payable to the Company in respect of
the subscription for or purchase of such convertible securities, plus the
additional consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such convertible securities. In case of
the issuance at any time of any additional shares of Common Stock or convertible
securities in payment or satisfaction of any dividends upon any class of stock
other than Common Stock, the Company shall be deemed to have received for such
additional shares of Common Stock or convertible securities a consideration
equal to the amount of such dividend so paid or satisfied. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any consideration and the fair value of such consideration
shall be determined by the Board of Directors to equal or exceed $2,000,000,
such determination shall, if requested by the holder of 51% of the outstanding
Warrants issued pursuant to the Purchase Agreement, be supported by an opinion
of an investment banking firm of recognized national standing selected by the
holder of this Warrant and acceptable to the Company.
7
(ii) When Adjustments to Be Made. The adjustments required by
Section 6 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable into that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 6(a)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of
Common Stock for which this Warrant is exercisable into immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Section 6 and not previously made, would result in a minimum
adjustment or, if sooner, on the date of exercise. For purposes of
clarification, upon receipt of any exercise notice in connection therewith, the
Company shall make any such postponed adjustments prior to effecting such
exercise. For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its occurrence.
8
(iii) Fractional Interests. In computing adjustments under this
Section 6, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(iv) When Adjustment Not Required.
(A) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution to stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(B) No adjustment shall be required pursuant to this Section 6
upon:
(1) the exercise of any warrants, options or convertible
securities granted, issued and outstanding on the date of issuance of this
Warrant;
(2) upon the grant or exercise of any stock or options which
may hereafter be granted or exercised under any employee stock option plan of
the Company now existing or to be implemented in the future, so long as the
issuance of such stock or options is approved by a majority of the independent
members of the Board of Directors of the Company or a majority of the members of
a committee of the independent directors established for such purpose; or
(3) the exercise of the Warrants;
(v) Escrow of Stock. If after any property becomes distributable
pursuant to this Section 6 by reason of the taking of any record of the holders
of Common Stock, but prior to the occurrence of the event for which such record
is taken, and the holder of this Warrant exercises this Warrant, any shares of
Common Stock issuable upon exercise by reason of such event shall be deemed the
last shares of Common Stock for which this Warrant is exercised (notwithstanding
any other provision to the contrary herein) and such shares or other property
shall be held in escrow for the holder of this Warrant by the Company to be
issued to the holder of this Warrant upon and to the extent that the event
actually takes place, upon payment of the current Purchase Price.
Notwithstanding any other provision to the contrary herein, if the event for
which such record was taken fails to occur or is rescinded, then such escrowed
shares shall be canceled by the Company and escrowed property returned.
9
(h) Other Action Affecting Common Stock. In case at any time or from time
to time the Comt 6 0 pany shall take any action in respect of its Common Stock,
other than the payment of dividends or any other action described in this
Section 6, then, unless such action will not have a materially adverse effect
upon the rights of the Holder of this Warrant, the number of shares of Common
Stock or other stock for which this Warrant is exercisable into and/or the
purchase price thereof shall be adjusted in such manner as may be equitable in
the circumstances.
(i) Certain Limitations. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the current Purchase Price to be less than the
par value per share of Common Stock.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Purchase Price, the Company, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of the Holder, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Purchase Price at the time in effect for this Warrant and (iii) the number of
shares of Common Stock and the amount, if any, or other property which at the
time would be received upon the exercise of this Warrant.
(k) Notices of Record Date. In the event of any fixing by the Company of a
record date for the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any shares of Common Stock or other
securities, or any right to subscribe for, purchase or otherwise acquire, or any
option for the purchase of, any shares of stock of any class or any other
securities or property, or to receive any other right, the Company shall mail to
the Holder at least thirty (30) days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or rights, and the amount and character
of such dividend, distribution or right.
(l) Merger, Consolidation, etc. In case of any capital reorganization or
any reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (or in the case
of any sale, transfer, or other disposition to another corporation of all or
substantially all the property, assets, business, and goodwill of the Company),
the Holder of this Warrant shall thereafter be entitled to purchase the kind and
amount of shares of capital stock which this Warrant entitled the Holder to
purchase immediately prior to such capital reorganization, reclassification of
capital stock, consolidation, merger, sale, transfer, or other disposition; and
in any such case appropriate adjustments shall be made in the application of the
provisions of this Section 6 with respect to rights and interests thereafter of
the Holder of this Warrant to the end that the provisions of this Section 6
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter purchasable upon the exercise of this
Warrant.
(m) Fractional Shares. No certificate for fractional shares shall be
issued upon the exercise of this Warrant.
10
(n) Rights of the Holder. The Holder of this Warrant shall not be entitled
to any rights of a shareholder of the Company in respect of any Warrant Shares
purchasable upon the exercise hereof until such Warrant Shares have been paid
for in full and issued to it. As soon as practicable after such exercise, the
Company shall deliver a certificate or certificates for the number of full
shares of Common Stock issuable upon such exercise, to the person or persons
entitled to receive the same.
(o) Future Priced Securities Limitation. Notwithstanding anything
contained herein to the contrary, the aggregate number of shares of Common Stock
issued upon conversion and exercise of the Future Priced Securities (as defined
below) cannot equal or exceed 20% of the Common Stock outstanding immediately
before the issuance of a Future Priced Security, unless the Company has obtained
prior shareholder approval for such issuance. In the event the aggregate number
of shares of Common Stock that would be issued upon conversion and exercise of
the Future Priced Securities equals or exceeds 20% of the Common Stock so
outstanding, and the Company has failed to obtain prior shareholder approval for
such issuance, then the number of shares of Common Stock which the holders of
the Future Priced Securities would be entitled to acquire through the conversion
and exercise of the Future Priced Securities shall be reduced on a pro rata
basis (in proportion to a fraction, the numerator of which shall be the total
number of shares of Common Stock issuable to the holder of a Future Priced
Security upon exercise and conversion of such holder's Future Priced Security,
and the denominator of which shall be the aggregate number of shares of Common
Stock issuable upon exercise and conversion of all of the Future Priced
Securities) so that the aggregate number of shares of Common Stock issuable upon
exercise and conversion of the Future Priced Securities does not equal or exceed
20% of the Common Stock outstanding immediately before the first issuance of a
Future Priced Security. For purposes of this Warrant, "Future Priced Securities"
shall mean the Warrants and Common Shares of the Company issued in connection
with the transactions contemplated by the Purchase Agreement.
7. REPRESENTATIONS AND WARRANTIES.
The Holder, by acceptance of this Warrant, represents and warrants to, and
covenants and agrees with, the Company as follows:
(a) The Warrant is being acquired for the Holder's own account for
investment and not with a view toward resale or distribution of any part
thereof, and the Holder has no present intention of selling, granting any
participation in, or otherwise distributing the same.
(b) The Holder is aware that the Warrant is not registered under the Act
or any state securities or blue sky laws and, as a result, substantial
restrictions exist with respect to the transferability of the Warrant and the
Warrant Shares to be acquired upon exercise of the Warrant.
(c) The Holder is an accredited investor as defined in Rule 501(a) of
Regulation D under the Act and is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the Warrant, and
its financial position is such that it can afford to retain the Warrant and the
Warrant Shares for an indefinite period of time without realizing any direct or
indirect cash return on this investment.
11
8. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such actions as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant. Upon the request of Holder, the Company will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
9. SUPPLYING INFORMATION
The Company shall cooperate with Holder and each holder of Warrant Shares
in supplying such information pertaining to the Company as may be reasonable
necessary for such Holder and each holder of Warrant Shares to complete and file
any information reporting forms presently or hereafter required by the
Securities and Exchange Commission as a condition to the availability of an
exemption from the Act for the sale of Warrant Shares.
10. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
11. MISCELLANEOUS.
(a) Transfer Taxes; Expenses. The Holder shall pay any and all
underwriters' discounts, brokerage fees, and transfer taxes incident to the sale
or exercise of this Warrant or the sale of the underlying shares issuable
thereunder, and shall pay the fees and expenses of any special attorneys or
accountants retained by it.
(b) Successors and Assigns. Subject to compliance with the provisions of
Section 3, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
12
(c) Notice. Any notice or other communication required or permitted to be
given to the Company shall be in writing and shall be delivered by certified
mail with return receipt or delivered in person against receipt, addressed to
the Company as follows:
Workstream Inc.
495 March Road, Suite 300,
Ottawa, Ontario, Canada K2K-3G1
Attn: Chairman
(d) Governing Law. This Warrant Certificate shall be governed by, and
construed in accordance with, the laws of the Province of Ontario and the
Country of Canada applicable therein, without reference to the conflicts of
laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed as of the date set forth below.
WORKSTREAM INC.
By:
--------------------------------------
Name: Michael Mullarkey
Title: Chairman and CEO
Date: December 15, 2004
13
FORM OF EXERCISE OF WARRANT
The undersigned hereby elects to exercise this Warrant as to ________
Common Shares covered thereby.
Enclosed herewith is a bank or certified check in the amount of $________.
Date:
------------------------ ---------------------------------
Name:
Address:
Signature
Guarantor:
--------
14