December 16, 2009 (FinancialWire) — Workstream Inc. (OTCBB: WSTM), a provider of on-demand compensation, performance and talent management solutions, said it has entered into separate Exchange Agreements with each of the holders of its $19 million in senior secured promissory notes pursuant to which, among other things, each holder exchanged its senior secured note for:

(i) a new senior secured non-convertible note for $9.5 million, (50% of outstanding notes) interest accrues at an annual rate of 9.5%, compounds quarterly basis and is payable, together with principal, on the maturity date, which is July 31, 2012 for all of the notes; a senior secured convertible note that is convertible into the company’s common shares at a conversion price of $.25, for $6,650,000 (35% of outstanding notes); and a senior secured convertible note that is convertible into the company’s common shares at a conversion price of $.10, for $2,850,000 (15% of outstanding notes).

“In summary, we have extended the maturity of our notes out 32 months to July 2012, provided an equity feature to our note holders allowing the company more time to build our business with them, and as partners, share in our success while we continue to grow,” said Michael Mullarkey, chief executive officer.

Mullarkey further stated that, “Our note holders have been working with us in an effort to improve our balance sheet and create long-term value. One of our note holders, increased their ownership, and now owns more then half of the notes, understanding the growing market in SaaS Software and the strong products and customers Workstream serves. We can now move the company forward with a new management team, balanced capital structure and a focus on our business.”

The aggregate principal amount of the notes issued pursuant to the Exchange Agreements with the company’s note holders is $21,511,000. Each note is secured by a lien on all of the assets of the company and its subsidiaries. Interest on each Note accrues at an annual rate of 9.5%. Interest on the convertible notes compounds on a quarterly basis and is payable, together with principal, on the maturity date, which is July 31, 2012 for all of the notes. Interest on the non-convertible notes compounds on a quarterly basis and is payable on the maturity date, while principal is payable on a quarterly basis pursuant to an agreed upon schedule. Upon the occurrence of an event of default, as defined in the notes, a holder may require the company to redeem all or a portion of such holder’s notes. Upon a disposition of assets or liquidity event (each as defined in the notes), the company is required to use 100% of the net proceeds to redeem the notes. Each note contains customary covenants with which the company must comply. Each subsidiary of the company has agreed to guarantee the obligations of the company under each note. More details will be in the company 8K.

Workstream provides on-demand compensation; performance and talent management solutions and services that help companies manage the entire employee lifecycle — from recruitment to retirement.

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