SENIOR SECURED NOTES LOAN AND SECURITY AGREEMENT AMONG WORKSTREAM USA, INC. PAULA ALLEN HOLDINGS, INC. THE OMNI PARTNERS, INC. 6FIGUREJOBS.COM, INC., AS THE BORROWERS, WORKSTREAM INC., as A guarantor AND HILCO FINANCIAL, LLC, AS THE LENDER DATED AS OF SEPTEMBER 28, 2006 TABLE OF CONTENTS

 

 

Exhibit A	Form of Term Note
Exhibit B	Form of Compliance Certificate
Exhibit C	Form of Deposit Account Agreement
Exhibit D	Schedule of Closing Documents
Schedule 3.6	Financing Statements
Schedule 5.1	Trade Names, Chief Executive Office, Principal Place of Business, and Locations of Collateral
Schedule 5.2	Capitalization and Organizational Chart
Schedule 5.5	Subsidiaries
Schedule 5.7	Litigation Matters
Schedule 5.11	Intellectual Property Disclosures
Schedule 5.14	Environmental Matters
Schedule 6.3	Permitted Liens
Schedule 6.4	Permitted Debt and Guaranties

Dated as of September 28, 2006

WORKSTREAM USA, INC., a Delaware corporation (“Workstream USA”), PAULA ALLEN HOLDINGS, INC., a Florida corporation (“Paula Allen Holdings”), THE OMNI PARTNERS, INC., a Florida corporation (“Omni Partners”), and 6FIGUREJOBS.COM, INC., a Delaware corporation (“6FigureJobs.com”) (Workstream USA, Paula Allen Holdings, Omni Partners and 6FigureJobs.com are referred to herein as the “Borrowers” and individually as a “Borrower”), WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Workstream”), and HILCO FINANCIAL, LLC, a Delaware limited liability company (the “Lender”), hereby agree as follows:

ARTICLE I 

 

Section 2.1  Definitions. For all purposes of this Agreement, except as otherwise expressly provided, the following terms shall have the meanings assigned to them in this Section or in the Section referenced after such term:

“Accounts” means all accounts, as such term is defined in the UCC, the PPSA and all “Claims” for the purpose of the Civil Code of Quebec (or similar Applicable Law), including each and every right to the payment of money, whether such right to payment now exists or hereafter arises, whether such right to payment arises out of a sale, lease or other disposition of goods or other property, out of a rendering of services, out of a loan, out of the overpayment of taxes or other liabilities, or otherwise arises under any contract or agreement, whether such right to payment is created, generated or earned by any Credit Party or by some other Person who subsequently transfers such Person’s interest to any Credit Party, whether such right to payment is or is not already earned by performance, and howsoever such right to payment may be evidenced, together with all other rights and interests (including all Liens) which any Credit Party may at any time have by law or agreement against any account debtor or other obligor obligated to make any such payment or against any property of such account debtor or other obligor; all including but not limited to all present and future accounts, contract rights, loans and obligations receivable, chattel papers, bonds, notes and other debt instruments, tax refunds and rights to payment in the nature of general intangibles.

“Advance” means the Term Advance or any other loan or advance made by the Lender to or for the benefit of the Borrowers at any time, and “Advances” means the Term Advance and all such other loans and advances collectively.

“Affiliate” or “Affiliates” means, with respect to a Person, (a) any family member, officer, director, employee or managing agent of such Person, and (b) any other Person (i) that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such given Person, (ii) that, directly or indirectly beneficially owns or holds 10% or more of any class of voting stock or partnership or other interest of such Person or any subsidiary of such Person, or (iii) 10% or more of the voting stock or partnership or other interest of which is directly or indirectly beneficially owned or held by such Person or a subsidiary of such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or partnership or other interests, by contract or otherwise.

 

“Agreement” means this Loan and Security Agreement.

“Agreement Date” means the date of this Agreement.

“Applicable Margin” means (i) from the Funding Date through the date that is 180 days after the Agreement Date, 2.50%, and (ii) at all times thereafter, 3.50%.

“Borrower Representative” has the meaning set forth in Section 2.11(b).

“Business Day” means any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Chicago, Illinois.

“Canadian Dollars” and “C$” means dollars in currency of Canada.

“Capital Expenditures” means for a period, any expenditure of money during such period for the lease, purchase or other acquisition of any capital asset, or for the lease of any other asset which constitutes a capitalized lease under GAAP, whether payable currently or in the future.

“Change of Control” means a Change of Control Transaction as defined in the Warrant.

“Collateral” means all of each Credit Party’s Accounts, chattel paper and electronic chattel paper, Deposit Accounts, documents, Equipment, General Intangibles, goods, instruments, Inventory, Investment Property, letter-of-credit rights, letters of credit, all sums on deposit in any Deposit Account, and any items in any Lockbox; together with (a) all substitutions and replacements for and products of any of the foregoing; (b) in the case of all goods, all accessions; (c) all accessories, attachments, parts, equipment and repairs now or hereafter attached or affixed to or used in connection with any goods; (d) all warehouse receipts, bills of lading and other documents of title now or hereafter covering such goods; (e) all collateral subject to the Lien of any Security Document; (f) any money, or other assets of each Credit Party that now or hereafter come into the possession, custody, or control of the Lender; (g) proceeds of any and all of the foregoing; (h) books and records of each Credit Party, including all mail or electronic mail addressed to such Credit Party; and (i) all of the foregoing, whether now owned or existing or hereafter acquired or arising or in which any Credit Party now has or hereafter acquires any rights.

“Constituent Documents” means with respect to any Person, as applicable, such Person’s certificate of incorporation, articles of incorporation, by-laws, certificate of formation, articles of organization, limited liability company agreement, management agreement, operating agreement, shareholder agreement, partnership agreement or similar document or agreement governing such Person’s existence, organization or management or concerning disposition of ownership interests of such Person or voting rights among such Person’s owners.

 

“Credit Party” means each Borrower, each Guarantor, any other Person directly or indirectly liable for all or any part of the Obligations, or any Person which has pledged any collateral for all or any part of the Obligations, and “Credit Parties” means all such Persons collectively.

“Debt” means of a Person as of a given date, all items of indebtedness or liability which in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of a balance sheet for such Person and shall also include the aggregate payments required to be made by such Person at any time under any lease that is considered a capitalized lease under GAAP.

“Default” means an event that, with giving of notice or passage of time or both, would constitute an Event of Default.

“Default Period” means any period of time beginning on the day an Event of Default occurs and ending on the date such Event of Default has been cured or waived in writing by the Lender.

“Default Rate” means an annual interest rate in effect during a Default Period or following the Termination Date, which interest rate shall be equal to two percent (2%) over the applicable rate otherwise in effect, as such rate may change from time to time.

“Deposit Accounts” means all of each Credit Party’s demand, time, savings, passbook, money market or other depository accounts, and all certificates of deposit, maintained by such Credit Party with any bank, savings and loan association, credit union or other depository institution.

“Deposit Account Agreement” means each agreement, in the form of Exhibit C attached hereto or otherwise in form and substance satisfactory to the Lender, among a bank or other depository institution, the applicable Credit Party and Lender delivered to Lender pursuant to Section 6.10 hereof, including in each case such provisions to provide dominion and control over such accounts to Lender such that upon notice by Lender to such institution of the occurrence of an Event of Default hereunder all actions under such account shall be taken solely at Lender’s direction.

“Director” means a director of the applicable Credit Party.

“Dollars” and “$” means dollars in currency of the United States of America.

“Environmental Law” means any federal, state, local or other governmental statute, regulation, law or ordinance dealing with the protection of human health and the environment.

“Equipment” means all equipment, as such term is defined in the UCC, the PPSA (or similar applicable law), whether now owned or hereafter acquired, including but not limited to all present and future machinery, vehicles, furniture, fixtures, manufacturing equipment, shop equipment, office and recordkeeping equipment, parts, tools, supplies, and including specifically the goods described in any equipment schedule or list herewith or hereafter furnished to the Lender by any Credit Party.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is a member of a group which includes any Credit Party and which is treated as a single employer under Section 414 of the IRC.

“Event of Default” has the meaning set forth in Section 7.1.

“Financial Covenants” means the covenants set forth in Section 6.2.

“Fundamental Change” has the meaning set forth in the Warrant.

“Funding Date” means the date of initial funding of the Term Loan.

“GAAP” means generally accepted accounting principles, applied on a basis consistent with the accounting practices applied in the financial statements described in Section 5.6.

“General Intangibles” means all general intangibles, as such term is defined in the UCC, the PPSA (or similar applicable law), whether now owned or hereafter acquired, including all present and future Intellectual Property Rights, customer or supplier lists and contracts, manuals, operating instructions, permits, franchises, the right to use any name, and the goodwill of each Credit Party’s business.

“Guarantor(s)” means Workstream and any other Person now or hereafter guarantying the Obligations. 

“Hazardous Substances” means pollutants, contaminants, hazardous substances, hazardous wastes, petroleum and fractions thereof, and all other chemicals, wastes, substances and materials listed in, regulated by or identified in any Environmental Law.

“Indebtedness” has the meaning set forth in the Transaction Agreement.

“Infringement” or “Infringing” when used with respect to Intellectual Property Rights means any infringement or other violation of Intellectual Property Rights.

“Intellectual Property Rights” means all (i) foreign and domestic patents, patent applications, patent disclosures and inventions, (ii) Internet domain names, trademarks, service marks, trade dress, trade names, logos and corporate names (both foreign and domestic) and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and copyrightable works and registrations and applications for registration thereof, (iv) computer software, data, data bases and documentation thereof, (v) trade secrets and other confidential information (including ideas, formulas, compositions, (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information), (vi) other material intellectual property rights and (vii) copies and tangible embodiments thereof.

 

“Inventory” means all inventory, as such term is defined in the UCC, the PPSA (or similar applicable law), whether now owned or hereafter acquired, whether consisting of whole goods, spare or maintenance parts or components, supplies or materials, whether acquired, held or furnished for sale, for lease or under service contracts or for manufacture or processing, and wherever located.

“Investment Property” means all investment property, as such term is defined in the UCC, the PPSA (or similar applicable law), whether now owned or hereafter acquired, including but not limited to all securities, security entitlements, securities accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund shares, money market shares and U.S. Government securities.

“IRC” means the Internal Revenue Code of 1986, as amended from time to time.

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or analogous instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a Person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.

“Loan Documents” means this Agreement, the Notes, the Security Documents, the Transaction Agreement, the Warrant Documents and any other agreement, document, instrument or certificate executed and/or delivered in connection with this Agreement or the transactions contemplated hereby.

“Make Whole Amount” means, with respect to any payment or prepayment (including, without limitation, at maturity, upon acceleration or otherwise) of the principal amount of the Term Advance, an additional amount that shall be paid by the Borrowers to the Lender on the date of such repayment or prepayment, if necessary, to permit the Lender to achieve an internal rate of return on the amount then being repaid or prepaid equal to (i) 30% per annum, if the repayment or prepayment occurs prior to the date that is 181 days after the Funding Date, and (ii) 40% per annum, if the repayment or prepayment occurs on or after the date that is 181 days after the Funding Date, in each case as determined in good faith by the Lender giving effect to all fees accrued under paragraph (d) of Section 2.4 and to all interest accrued and paid prior to or concurrently with the making of any such Make Whole Amount in accordance with this Agreement (it being understood by the parties that to the extent any sum of interest has been paid, such sum, however characterized, will not be paid again as part of any Make Whole Payment and it being further understood that any accrued and unpaid interest which is included in the payment of any Make Whole Amount shall cease to be payable as interest accrued).

“Material Adverse Effect” means any of the following:

(a) A material adverse effect on the business, operations, results of operations, prospects, assets, liabilities or condition (financial or otherwise) of any Credit Party;

 

(b) A material adverse effect on the ability of any Credit Party to perform its obligations under the Loan Documents;

(c) A material adverse effect on the ability of the Lender to enforce the Obligations or to realize the intended benefits of the Security Documents, including a material adverse effect on the validity or enforceability of any Loan Document or of any rights against any Guarantor, or on the status, existence, perfection, priority (subject to Permitted Liens) or enforceability of any Lien securing payment or performance of the Obligations; or

(d) Any claim against any Credit Party or any threat of litigation which if determined adversely to such Credit Party would cause such Credit Party to be liable to pay an amount exceeding $500,000 or would be an event described in clauses (a), (b) and (c) above.

“Maturity Date” means the date that is 545 days after the Funding Date.

“Minimum Liquidity” means, at any time, that (i) the sum of the Qualified Account Amount and Qualified Cash at such time is at least $15,000,000 and (ii) Qualified Cash at such time is at least $10,000,000.

“Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which any Credit Party or any ERISA Affiliate contributes or is obligated to contribute.

“Note” means the Term Note or any other promissory note by the Borrowers in favor of the Lender, and “Notes” means the Term Note and all such other Notes collectively.

“Obligations” means each Advance and each and every other debt, liability and obligation of every type and description which any Credit Party may now or at any time hereafter owe to the Lender (including all interest and fees contemplated by this Agreement and the other Loan Documents, and including any amounts owing under the Warrant and the Registration Rights Agreement), whether such debt, liability or obligation now exists or is hereafter created or incurred, whether it arises in a transaction involving the Lender alone or in a transaction involving other creditors of such Credit Party, and whether it is direct or indirect, due or to become due, absolute or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint and several, and including all Debt of each Credit Party arising under any Loan Document between such Credit Party and the Lender, whether now in effect or hereafter entered into.

“Officer” means an officer of the applicable Credit Party.

“Owner” means with respect to any Credit Party, each Person having legal or beneficial title to an ownership interest in such Credit Party or a right to acquire such an interest (excluding the Lender with respect to its rights under any Warrant Documents or any Pledge Agreement).

 

“Parent Pledge Agreement” means the Pledge Agreement of even date herewith executed by Workstream in favor of the Lender, pledging all of the capital stock of Workstream USA held by it.

“Patent, Trademark and Copyright Security Agreement” means the Patent, Trademark and Copyright Security Agreement dated as of the Agreement Date made by Workstream and the Borrowers in favor of the Lender.

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for employees of any Credit Party or any ERISA Affiliate and covered by Title IV of ERISA.

“Permitted Lien” and “Permitted Liens” have the meanings set forth in Section 6.3(a).

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of any Credit Party or any ERISA Affiliate.

“Pledge Agreements” means the Parent Pledge Agreement, the Workstream USA Pledge Agreement and any other pledge agreement entered into after the Agreement Date by any Credit Party.

“PPSA” means the Personal Property Security Act as the same may, from time to time, be in effect in the Province of Ontario; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of the Lender's security interest in any Collateral is governed by the Personal Property Security Act as in effect in a jurisdiction other than the Province of Ontario, the term “PPSA” shall mean the Personal Property Security Act or a similar act or statute as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection or priority and for purposes of definition related to such provisions.

“Premises” means all locations where each Credit Party conducts its business or has any rights of possession, including but not limited to the addresses listed on Schedule 5.1 attached hereto.

“Prime Rate” means, at any time, the rate of interest which is identified and normally published by Bloomberg Professional Service Page Prime as the “Prime Rate” (or, if more than one rate is published as the Prime Rate, then the highest of such rates). Any change in Prime Rate will become effective as of the date the rate of interest which is so identified as the “Prime Rate” is different from that published on the preceding Business Day. If Bloomberg Professional Service no longer reports the Prime Rate, or if such Page Prime no longer exists, or the Lender determines in good faith that the rate so reported no longer accurately reflects an accurate determination of the prevailing Prime Rate, the Lender may select a reasonably comparable index or source to use as the basis for the Prime Rate. The “Prime Rate” may not be the lowest or best rate at which the Lender calculates interest or extends credit.

 

“Qualified Accounts” means Accounts of a Borrower arising in the ordinary course of such Borrower’s business, payable in Dollars or Canadian Dollars and deemed by the Lender in its commercially reasonable judgment to be Qualified Accounts. Unless otherwise approved in writing by the Lender, the following Accounts shall not be deemed Qualified Accounts:

 

  

(iii) Accounts which have been disputed; the account debtor has asserted a setoff, defense or counterclaim with respect to the applicable Account (provided, that in the case of any dispute, setoff, defense or counterclaim with respect to any Account, only that portion of the Account subject to such dispute, setoff, defense or counterclaim shall be deemed ineligible by reason of this clause (iii));

(iv) Accounts that are not lawfully owned by a Borrower free and clear of any Lien, other than Permitted Liens (provided that the Lien in favor of the Lender shall be a first priority Lien), or are not otherwise in compliance with all representations and warranties made by Borrowers with respect thereto in the Loan Documents;

(v) Accounts that are not unconditionally payable within 90 days from the invoice date;

(vi) Accounts that are evidenced by a judgment or a promissory note, chattel paper or any other instrument or other document that is not in the possession of the Lender or does not contain all necessary endorsements in favor of the Lender;

(vii) Accounts that remain unpaid more than 60 days past the invoice due date;

(viii) Accounts due from an Affiliate or an employee, officer, director, creditor or supplier of any Credit Party;

(ix) Accounts constituting an obligation of the United States of America or any other Governmental Authority (unless all steps required by the Lender in connection therewith, including notice to the Government of the United States of America under the Federal Assignment of Claims Act or any action under any state statute comparable to the Federal Assignment of Claims Act, have been duly taken in a manner reasonably satisfactory to the Lender);

(x) Accounts due from an account debtor (or an applicable office of such account debtor) not located in a state of the United States of America or in Canada which are not supported by a letter of credit or other similar credit satisfactory to the Lender; provided, however, that Accounts due from account debtors located in Canada shall not at any time constitute more than 10% of all Qualified Accounts at such time;

 

(xi) Accounts owing from an account debtor for which more than 50% of the aggregate amount of all Accounts owing to the Borrowers from such account debtor remain unpaid more than 90 days past the invoice date;

(xii) Accounts from an account debtor that (A) has filed a petition for bankruptcy or any other relief under the Bankruptcy Code or any other law relating to bankruptcy, insolvency, reorganization or relief of debtors, made an assignment for the benefit of creditors, had filed against it any petition or other application for relief under the Bankruptcy Code or any such other law, (B) has failed, suspended business operations, become insolvent or called a meeting of its creditors for the purpose of obtaining any financial concession or accommodation, or (C) has had or suffered to be appointed a receiver or a trustee for all or a significant portion of its assets or affairs;

(xiii) Accounts owing from an account debtor to the extent such Accounts exceed 20% of the aggregate Qualified Accounts of Borrowers (provided, that only that portion of the Accounts of any account debtor which exceeds the applicable percentage rate of the aggregate Qualified Accounts of Borrowers set forth above with respect to such account debtor shall be so deemed ineligible shall be deemed ineligible by reason of this clause (xiii));

(xiv) Accounts with respect to which the Lender has notified Borrowers in writing that Lender is not reasonably satisfied with the credit standing of the account debtor in relation to the aggregate amount of credit extended to such account debtor by Borrowers or for which the Lender believes, in its sole discretion (which discretion shall not be exercised in an arbitrary or capricious manner), that the prospect of collection thereof is impaired in any material respect for any reason;

(xv) Accounts in respect of which the Lender does not have a perfected first priority Lien; and

(xvi)  Accounts owing from an account debtor located in a state in which such Borrower is deemed to be doing business under the laws of such state and which denies creditors access to its courts in the absence of qualification to transact business in such state or of the filing of any reports with such state, unless such Borrower has qualified as a foreign entity authorized to transact business in such state or has filed all required reports.

“Qualified Account Amount” means, at any time, the net amount of Qualified Accounts at such time. As used herein, the phrase "net amount of Qualified Accounts" shall mean the face amount of such Accounts at any time less any and all returns, rebates, discounts (which may, at the Lender's option, be calculated on shortest terms), credits or allowances at any time issued, owing, claimed by account debtors or granted in connection with, or any interest accrued on the amount of, such Accounts at such time.

“Qualified Cash” means, at any time, the aggregate amount of unrestricted cash in each Deposit Account that is (i) maintained by a Credit Party with a depositary institution in the United States of America or Canada at such time and (ii) subject to a Deposit Account Agreement (or, in the case of a Deposit Account maintained by a Credit Party with a depositary institution in Canada, at the Lender’s option, an alternative arrangement satisfactory to the Lender which, in the Lender’s judgment, provides equivalent benefits to the Lender under applicable Canadian law as the Lender would have as a secured party by virtue of a Deposit Account Agreement under U.S. law) at such time; provided, however, that not more than $1,000,000 of cash maintained by the Credit Parties with depositary institutions in Canada shall be included as Qualified Cash at any one time.

 

“Reportable Event” means a reportable event (as defined in Section 4043 of ERISA), other than an event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the Pension Benefit Guaranty Corporation.

“Restricted Payment” means (i) any redemption or prepayment or other retirement, prior to the stated maturity thereof or prior to the due date of any regularly scheduled installment or amortization payment with respect thereto, of any Debt (other than the Obligations), and (ii) any payment on or with respect to any Subordinated Debt other than in accordance with the terms of the applicable Subordination Agreement, if any.

“Securities Accounts” means all of each Credit Party’s securities accounts, as such term is defined in the UCC.

“Securities Account Agreement” means each agreement, in form and substance satisfactory to the Lender, among a securities intermediary, the applicable Credit Party and Lender delivered to Lender pursuant to Section 6.10 hereof, including in each case such provisions to provide dominion and control over such accounts to Lender such that upon notice by Lender to such securities intermediary of the occurrence of an Event of Default hereunder all actions under such account shall be taken solely at Lender’s direction.

“Security Documents” means this Agreement, the guaranty of any Guarantor, a security agreement of each Guarantor, in each case in form and substance satisfactory to Lender, the Patent, Trademark and Copyright Security Agreement, the Pledge Agreements and any other document delivered to the Lender from time to time to secure the Obligations.

“Security Interest” has the meaning set forth in Section 3.1.

“Subordinated Debt” means Debt which is subordinated to the Obligations pursuant to a Subordination Agreement or which is subordinated to the Obligations pursuant to the agreements, documents and instruments evidencing such Debt (which subordination provisions must be acceptable to the Lender in its discretion).

“Subordination Agreement” means any subordination agreement in favor of the Lender which is accepted in writing by the Lender from time to time and which subordinates any Debt of a Credit Party to the Obligations.

“Subsidiary” means, with respect to any Person, (a) any corporation of which an aggregate of more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, capital stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, or with respect to which any such Person has the right (directly or indirectly) to vote or designate the vote of 50% or more of such capital stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50% or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of Workstream.

 

“Term Advance” means the $15,000,000 term loan made by the Lender to the Borrowers pursuant to the terms of this Agreement.

“Term Note” means the Borrowers’ term loan promissory note, payable to the order of the Lender in substantially the form of Exhibit A hereto, as same may be renewed and amended from time to time, and all replacements thereof.

“Termination Date” means the earlier of (a) the Maturity Date, or (b) the date the Lender demands payment of the Obligations, following an Event of Default, pursuant to Section 7.2.

“Transaction Agreement” means that certain Transaction Agreement between Workstream and the Lender, dated the date hereof.

“Triggering Event” has the meaning set forth in the Transaction Agreement.

“UCC” means the Uniform Commercial Code as in effect in the State of Illinois, or in any other state whose laws are held to govern this Agreement or any portion hereof.

“Warrant Documents” means each warrant (including the Warrant), registration rights agreement and each related document between Workstream and the Lender with respect to any warrant or any other right of the Lender to obtain, register, have registered, sell or otherwise dispose of any equity interest of Workstream, and such other documents contemplated by the Transaction Agreement related thereto.

“Warrant” has the meaning set forth in the Transaction Agreement.

“Workstream USA Pledge Agreement” means the Pledge Agreement of even date herewith executed by Workstream USA in favor of the Lender, pledging all of the capital stock of Paula Allen Holdings, Omni Partners and 6FigureJobs.com held by it.

Section 1.2  Other Definitional Terms; Rules of Interpretation. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP. All terms defined in the UCC or the PPSA and not otherwise defined herein have the meanings assigned to them in the UCC or the PPSA, as the context may require. References to Articles, Sections, subsections, Exhibits, Schedules and the like, are to Articles, Sections and subsections of, or Exhibits or Schedules attached to, this Agreement unless otherwise expressly provided. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. Unless the context in which used herein otherwise clearly requires, “or” has the inclusive meaning represented by the phrase “and/or”. Defined terms include in the singular number the plural and in the plural number the singular. Reference to any agreement (including the Loan Documents), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof (and, if applicable, in accordance with the terms hereof and the other Loan Documents), except where otherwise explicitly provided, and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor. Reference to any law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation means such law, rule, regulation, order, decree, requirement, policy, guideline, directive or interpretation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect on the determination date, including rules and regulations promulgated thereunder. Except as otherwise expressly provided herein, reference to any United States law, rule or regulation shall also mean and include any analogous Canadian law, rule or regulation, as the context may require. Reference to time of day, unless otherwise specifically provided, means local time in Chicago, Illinois.

 

ARTICLE II 

 

Section 2.1  Term Advance. The Lender agrees, subject to the terms and conditions of this Agreement (including the satisfaction of the conditions precedent set forth in Article IV), to make the Term Advance to the Borrowers in the form of a single advance in the amount of $15,000,000; provided, however, that the Lender may, at its option, withhold from such Term Advance the amount of all fees, costs and expenses due to the Lender or for which the Borrowers are obligated to reimburse the Lender hereunder. The Borrowers’ obligation to pay the Term Advance shall be evidenced by the Term Note and shall be secured by the Collateral as provided in Article III. Amounts repaid with respect to the Term Advance may not be reborrowed, and the Borrowers acknowledge and agree that the Lender has no commitment to make any loans or other financial accommodations to the Borrowers (or any of them) hereunder other than the Term Advance.

Section 2.2  Payment of Term Advance. The Term Advance shall be due and payable as follows:

(a) Immediately upon receipt by any Credit Party of proceeds of any asset disposition (other than any disposition of assets that is permitted under Section 6.18(c)), such Credit Party shall notify the Lender thereof in writing and prepay the Term Advance in an amount equal to 90% of all such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by such Credit Party in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens on such asset (to the extent such Liens constitute Permitted Liens hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Nothing in this Section 2.2 shall be construed to constitute the Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.

 

(b) On the Termination Date, the entire unpaid principal balance of the Term Advance, all unpaid interest accrued thereon and the Make Whole Amount shall in any event be due and payable by the Borrowers.

Section 2.3  Interest; Default Interest Rate; Participations; Usury.

 

(a)  Interest Rate. All outstanding Advances shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on interest thereon not paid when due) from the date made until paid in full in cash at a rate determined by reference to the Prime Rate plus the Applicable Margin. Each change in the Prime Rate shall be reflected in the interest rate applicable to Advances as of the effective date of such change. All interest charges and fees hereunder shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest and fees being paid than if computed on the basis of a 365-day year).

 

(b)  Default Interest Rate. At any time during any Default Period or following the Termination Date, in the Lender’s sole discretion and without waiving any of its other rights or remedies, the principal of the Advances shall bear interest at the Default Rate or such lesser rate as the Lender may determine, effective as of the first day on which any Default Period begins through the last day of such Default Period, or any shorter time period that the Lender may determine. The decision of the Lender to impose a rate that is less than the Default Rate or to not impose the Default Rate for the entire duration of the Default Period shall be made by Lender in its sole discretion and shall not be a waiver of any of its other rights and remedies, including its right to retroactively impose the full Default Rate for the entirety of any such Default Period or following the Termination Date.

 

(c)  Participations. If any Person shall acquire a participation in the Advances, the Borrowers shall be obligated to the Lender to pay the full amount of all interest calculated under this Section 2.3, along with all other fees, charges and other amounts due under this Agreement, regardless if such Person elects to accept interest with respect to its participation at a lower rate than that calculated under this Section 2.3, or otherwise elects to accept less than its pro rata share of such fees, charges and other amounts due under this Agreement.

  

(d)  Usury. In any event no rate change shall be put into effect which would result in a rate greater than the highest rate permitted by law. Notwithstanding anything to the contrary contained in any Loan Document, all agreements which either now are or which shall become agreements between the Borrowers and the Lender are hereby limited so that in no contingency or event whatsoever shall the total liability for payments in the nature of interest, additional interest and other charges exceed the applicable limits imposed by any applicable usury laws. This provision shall never be superseded or waived and shall control every other provision of the Loan Documents and all agreements between the Borrowers and the Lender, or their successors and assigns. It is the intention of the parties that in no event shall the amounts paid by the Borrowers and/or the Guarantors, or payable to or received by Lender under the Loan Documents or any related documents, including without limitation any amounts that would be characterized as "interest" under applicable law (including, without limitation, any applicable Canadian law), exceed amounts permitted under any such applicable law. Accordingly, if any obligation to pay, payment made to the Lender, or collection by the Lender pursuant the Loan Documents (or in connection therewith) is finally judicially determined to be contrary to any such applicable law, such obligation to pay, payment or collection shall be deemed to have been made by mutual mistake of the Lender, the Borrowers and the Guarantors and such amount shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by the applicable law. Such adjustment shall be effected, to the extent necessary, by reducing or refunding (as required by applicable law and, to the extent not so required, at the option of the Lender) the amount of interest or any other amounts which would constitute unlawful amounts required to be paid or actually paid to the Lender under the Loan Documents and any such other agreement related thereto or by treating any such excess interest paid to be a payment of principal hereunder. For greater certainty, to the extent that any interest, charges, fees, expenses or other amounts required to be paid to or received by the Lender under the Loan Documents or related thereto are held to be within the meaning of "interest" or another applicable term to otherwise be violative of applicable law, such amounts shall be pro-rated over (A) the period of time to which they relate or (B) otherwise over the period from the initial advance date to the applicable Maturity Date (or repayment date as applicable).

 

 

(e)  Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by the Lender, or any Person controlling the Lender, and the Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person’s capital as a consequence of its commitments or the Advances made by the Lender is reduced to a level below that which the Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by the Lender to the Borrowers, the Borrowers shall immediately pay directly to the Lender additional amounts sufficient to compensate the Lender or such controlling Person for such reduction in rate of return. A statement of the Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrowers. In determining such amount, the Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.

  

(f)  Taxes. All payments by the Borrowers of principal of, and interest on, the Advances and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by the Lender’s net income or receipts (such non-excluded items being called “Taxes”). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrowers will:

  

(i)  pay directly to the relevant authority the full amount required to be so withheld or deducted, including, without limitation, as a result of any payment under clause (iii) below;  

 

(ii)  promptly forward to the Lender an official receipt or other documentation satisfactory to the Lender evidencing such payment to such authority; and

  

(iii)  pay to the Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by the Lender will equal the full amount the Lender would have received had no such withholding or deduction been required.

  

Moreover, if any Taxes are directly asserted against the Lender with respect to any payment received by the Lender hereunder, the Lender may pay such Taxes and the Borrowers will promptly pay such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by the Lender after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount the Lender would have received had not such Taxes been asserted. If the Borrowers fail to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence, the Borrowers shall indemnify the Lender for any incremental Taxes, interest or penalties that may become payable by the Lender as a result of any such failure.

Section 2.4  Fees.

  

(a)  Intentionally Deleted.

  

(b)  Collateral Exam Expenses. The Borrowers shall pay the Lender all actual out-of-pocket costs and expenses incurred by the Borrowers or any collateral examiner engaged by the Borrowers in conducting any collateral examination or inspection of the Collateral or the Borrowers’ operations or businesses.

  

(c)  Intentionally Deleted.

 

(d)  Prepayment Fee. If the Term Advance is prepaid for any reason, in whole or in part, the Borrowers shall pay to the Lender the Make Whole Amount with respect to the amount prepaid as a prepayment fee. The Borrowers acknowledge that a prepayment may result in the Lender incurring additional costs (including, without limitation, opportunity costs), expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. The Borrowers therefore agree to pay the above-described prepayment fee and agrees that said prepayment fee represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of the Lender.

Section 2.5  Time for Interest Payments; Payment on Non-Business Days; Computation of Interest and Fees; Place of Payment.

 

(a)  Time For Interest Payments. Accrued and unpaid interest on the Advances shall be due and payable on the first day of each month and on the Termination Date. Additionally, all accrued but unpaid interest on the Advances shall be due and payable contemporaneously with any prepayment thereof (whether voluntary or mandatory). Interest will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of advance to the date such payment is due.

 

 

  

(b)  Payment on Non-Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest on the Advances or the fees hereunder, as the case may be.

  

(c)  Place of Payments. All payments by Credit Parties of the Obligations shall be without deduction, defense, setoff or counterclaim and shall be made in same day funds and delivered to the Lender in Chicago, Illinois by wire transfer to such account as the Lender shall from time to time designate to the Credit Parties in writing.

Section 2.6  Voluntary Prepayment. Except as otherwise provided herein, the Borrowers may prepay the Advances in whole at any time or from time to time in part.

Section 2.7   Application of Payments. Any payment received by the Lender may be applied to the Obligations in such order and in such amounts as the Lender in its sole discretion may determine from time to time.

Section 2.8  Advances to Pay Obligations. While the Lender has no obligation to do so, the Lender may, in its discretion at any time or from time to time during a Default Period, without any Borrower’s request, make an Advance in an amount equal to the portion of the Obligations from time to time due and payable. Any such Advance shall constitute an Obligation hereunder, shall be secured by all of the Collateral, shall bear interest at the Default Rate and shall be payable by the Borrowers (together with all accrued interest thereon) on the earlier of (a) the Lender’s demand therefor and (b) the Termination Date.

Section 2.9  Use of Proceeds. The Borrowers shall use the proceeds of the Term Advance only for ordinary working capital purposes.

Section 2.10  Liability Records. The Lender may maintain from time to time, at its discretion, records as to the Obligations. All entries made on any such record shall be presumed correct until the Borrowers establish the contrary. Upon the Lender’s demand, the Borrowers will admit and certify in writing the exact principal balance of the Obligations that the Borrowers then assert to be outstanding.

Section 2.11  Joint and Several Liability; Appointment of Borrower Representative.

 

(a)  Each Borrower acknowledges that it is jointly and severally liable for all of the Obligations under the Loan Documents. Each Borrower expressly understands, agrees and acknowledges that (i) the Borrowers are all affiliated entities and part of a mutual and collective business enterprise, (ii) each Borrower desires to have the availability of one common credit facility instead of separate credit facilities, (iii) each Borrower has requested that the Lender extend such a common credit facility on the terms herein provided, (iv) the Lender will be lending against, and relying on a security interest in, all of the Borrowers’ assets even though the proceeds of any particular Advance made hereunder may not be advanced directly to a particular Borrower, (v) each Borrower will nonetheless benefit by the making of all such Advances by the Lender and the availability of a single credit facility of a size greater than each could independently warrant, and (vi) all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in the Loan Documents shall be applicable to and shall be binding upon each Borrower.

 

(b)  Each of the Borrowers hereby irrevocably designates and authorizes Workstream to act as its representative and agent generally for purposes of this Agreement and the other Loan Documents (Workstream, in such capacity, including its successors and assigns, is referred to herein as the “Borrower Representative”). Each Borrower agrees (i) that Borrower Representative may exercise any right, or perform any obligation, specified by this Agreement on such Borrower’s behalf, (ii) that all documents and instruments executed by the Borrower Representative on such Borrower’s behalf will jointly and severally bind such Borrower, and (iii) to be bound by any communication or request delivered by the Borrower Representative to the Lender or its agents. Each Borrower grants to Borrower Representative a power of attorney to act on its behalf as provided herein, including, without limitation, with respect to executing documents and instruments, requesting Advances hereunder, and providing notices, reports, certificates and statements to, and receiving the same from, the Lender hereunder and under the other Loan Documents. This appointment as attorney-in-fact is durable and irrevocable as long as any Obligations are outstanding and this Agreement has not been terminated, and will not be affected by any disability or incapacity of any Borrower’s employees, agents or representatives, or the lapse of time. The Lender shall be entitled to rely on any such communication or request delivered by the Borrower Representative.

ARTICLE III  

  

Section 3.1  Grant of Security Interest. 

  

(a)  Each Borrower hereby pledges, assigns and grants to the Lender a lien on and security interest in the Collateral (collectively referred to as the “Security Interest”) as security for the payment and performance of the Obligations. Upon request by the Lender, each Borrower will grant the Lender a security interest in all commercial tort claims it may have against any Person.

  

(b)  Without limiting the generality of the foregoing, as additional security for the payment and performance of the Obligations, each Borrower hereby grants to the Lender a continuing security interest in and Lien upon, and hereby collaterally assigns to the Lender, all of such Borrower's right, title and interest in and to each Deposit Account and in and to any deposits or other sums at any time credited to each such Deposit Account. In connection with the foregoing, each Borrower hereby authorizes and directs each bank or other depository which maintains any Deposit Account to pay or deliver to the Lender upon the Lender’s written demand therefor made at any time during a Default Period and without further notice to such Borrower (such notice being hereby expressly waived), all balances in each Deposit Account with such depository for application to the Obligations then outstanding, and the rights given to the Lender in this Section shall be cumulative with and in addition to the Lender’s other rights and remedies in regard to the amounts on deposit in any Deposit Account as proceeds of Collateral. Each Borrower hereby irrevocably appoints the Lender as such Borrower’s attorney-in-fact to collect any and all such balances to the extent any such payment is not made to the Lender by such bank or other depository after demand thereon is made by the Lender pursuant hereto.

 

 

Section 3.2  Notification of Account Debtors and Other Obligors. The Lender may at any time during a Default Period notify any account debtor or other Person obligated to pay the amount due that such right to payment has been assigned or transferred to the Lender for security and, subject to applicable law, shall be paid directly to the Lender. Each Borrower will join in giving such notice if the Lender so requests. At any time after any Borrower or the Lender gives such notice to an account debtor or other obligor, the Lender may, but need not, subject to applicable law, in the Lender’s name or in such Borrower’s name, (a) demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, any such right to payment, or grant any extension to, make any compromise or settlement with or otherwise agree to waive, modify, amend or change the obligations (including collateral obligations) of any such account debtor or other obligor.

Section 3.3  Assignment of Insurance. As additional security for the payment and performance of the Obligations, each Borrower hereby assigns to the Lender any and all monies (including proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of such Borrower with respect to, any and all policies of insurance now or at any time hereafter covering the Collateral or any evidence thereof or any business records or valuable papers pertaining thereto, and such Borrower hereby directs the issuer of any such policy to pay all such monies directly to the Lender. At any time, whether or not a Default Period then exists, the Lender may (but need not), in the Lender’s name or in such Borrower’s name, execute and deliver proofs of claims, receive all such monies, endorse checks and other instruments representing payment of such monies, and adjust, litigate, compromise or release any claim against the issuer of any such policy.

Section 3.4  Occupancy.

(a) Each Borrower hereby irrevocably grants to the Lender the right to take exclusive possession of the Premises at any time during a Default Period without notice or consent.

(b) The Lender may use the Premises only to hold, process, manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of goods that are Collateral and for other purposes that the Lender may in good faith deem to be related or incidental purposes.

(c) The Lender’s right to hold the Premises shall cease and terminate upon the earlier of (i) payment in full and discharge of all Obligations and termination of this Agreement, and (ii) final sale or disposition of all goods constituting Collateral and delivery of all such goods to purchasers.

(d) The Lender shall not be obligated to pay or account for any rent or other compensation for the possession, occupancy or use of any of the Premises; provided, however, that if the Lender does pay or account for any rent or other compensation for the possession, occupancy or use of any of the Premises, the Borrowers shall reimburse the Lender promptly for the full amount thereof. In addition, the Borrowers will pay, or reimburse the Lender for, all taxes, fees, duties, imposts, charges and expenses at any time incurred by or imposed upon the Lender by reason of the execution, delivery, existence, recordation, performance or enforcement of this Agreement or the provisions of this Section 3.4.