8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): August 13, 2010

WORKSTREAM INC.

(Exact Name of Registrant as Specified in Charter)

CANADA	001-15503	N/A
(State or Other Jurisdiction  of Incorporation)	(Commission File Number)	(I.R.S. Employer   Identification No.)

485 N. KELLER ROAD, SUITE 500, MAITLAND, FL 32751

(Address of Principal Executive Offices) (Zip Code)

(407) 475-5500

 (Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.  Entry into a Material Definitive Agreement.

On August 13, 2010, Workstream Inc. (the “Company”) entered into separate 2010 Exchange and Share Purchase Agreements and a 2010 Exchange Agreement (collectively, the “Exchange Agreements”) with each of the holders of its senior secured promissory notes (collectively, the “Investors”) pursuant to which, among other things, the Investors exchanged their existing senior secured non-convertible notes and senior secured convertible notes (collectively, the “Notes”) (the aggregate principal amount of all the Notes, together with accrued but unpaid interest and penalties, was $22,356,665) for a total of 682,852,374 of the Company’s common shares (the “Exchange Shares”).  The issuance of the Exchange Shares was deemed to be exempt from registration pursuant to Section 3( a)(9) of the Securities Act of 1933.

Pursuant to the terms of the Exchange Agreements with certain of the Investors, the Company consummated a private placement pursuant to which it raised $750,000 through the sale of an aggregate 37,936,243 common shares in the Company to certain of the Investors.  Simultaneous with the consummation of the transactions contemplated by the Exchange Agreements, pursuant to the terms of a Stock Purchase Agreement (the “Stock Purchase Agreement”) between the Company, an affiliate of John Long and David Kennedy and Ezra Schneier (together, the “New Management Team”), the Company completed a private placement pursuant to which it raised an additional $500,000 through the sale of an aggregate 25,290,828 common shares in the Company to the New Management Team (such common shares, together with the common shares pur chased under the Exchange Agreements by the Investors, the “Purchased Shares”).  The issuance of the Purchased Shares was deemed to be exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.  The Company will use the proceeds from the private placements for working capital and general corporate purposes.

The Company and each of the Investors also entered into a Third Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company agreed to register for resale under the Securities Act of 1933, upon the request of a majority of the holders of Registrable Securities thereunder, the Exchange Shares, the Purchased Shares and the common shares issuable upon exercise of certain warrants.  If the Company fails to comply with the filing and effectiveness deadlines set forth in the Registration Rights Agreement, the Company must pay to the Investor an amount in cash equal to 0.5% of the sum of the aggregate principal amount of the Notes that were exchanged under the applicable Exchange Agreement and the purchase price paid for the Purchased Shares purchased by such Investo r under the relevant Exchange Agreement on the date of such failure and each 30 day anniversary thereafter, in an amount not to exceed $1,000,000 in the aggregate.

Simultaneous with the consummation of the transactions contemplated by the Exchange Agreements, the Company received an additional $750,000 from one of the Investors (the “Lending Investor”) in exchange for a senior secured note (the “New Note”).  The New Note is secured by a lien on all of the assets of the Company and its subsidiaries pursuant to the terms of a Security Agreement among the Company, its subsidiaries and the

Lending Investor (the “Security Agreement”).  Interest on the New Note accrues at an annual rate of 12%.  From and after the occurrence and during the continuance of any event of default under the New Note, the interest rate then in effect will be automatically increased to 15% per year.  Interest is payable at maturity of the New Note, which is October 13, 2012.  Upon the occurrence of an event of default, as defined in the New Note, the Lending Investor may require the Company to redeem all or a portion of the New Note.  Upon a Disposition (as defined in the New Note), the Company has agreed to use the Net Proceeds from such Disposition to redeem the New Note.  The New Note contains customary covenants with which the Company must comply.  Each subsidiary o f the Company delivered a Guaranty pursuant to which it agreed to guarantee the obligations of the Company under the New Note (the “Guaranty”).

In connection with the closing of the Stock Purchase Agreement, the Company entered into an employment agreement with each of John Long, David Kennedy and Ezra Schneier.  The Company also terminated its employment agreement with Michael Mullarkey, the Company’s former Chief Executive Officer and President, and entered into a new employment agreement with Mr. Mullarkey pursuant to which he became the Executive Vice President, Sales and Marketing of the Company.  Each employment agreement has an initial three-year term that expires on August 13, 2013 and which automatically renews at the end of the initial term and each renewal term for an additional one-year term unless either party provides prior written notice of non-renewal.

Mr. Long will serve as Chief Executive Officer of the Company.  Immediately prior to joining the Company, Mr. Long, age 54, was, and continues to be, a principal in Yardley Capital Advisors, LLC, a private equity investment company.  From October 2008 until May 2010, Mr. Long served as Chief Executive Officer of Excelus HR, Inc.  From July 2003 until June 2007, Mr. Long served as Chief Executive Officer of First Advantage Corporation, a diversified business services company.  Mr. Long will earn an initial base salary of U.S.$250,000.  Upon entering into the employment agreement, Mr. Long received 20,348,798 Restricted Stock Units in the Company (“RSUs”) and options to purchase 10,174,399 common shares exercisable at a price of $0.01977 per share.  Such RSUs and option s vest in equal quarterly installments beginning on the three month anniversary of the date of grant; provided, however, that upon a “change of control” (as defined in the employment agreement), all unvested RSUs and options shall automatically vest.  Mr. Long is also eligible to receive an annual bonus for each fiscal year of up 100% of his base salary based on achieving certain goals, which are to be mutually agreed upon, including a prorated bonus for the fiscal year ending May 31, 2010.Such bonus will be payable in cash unless the Board of Directors of the Company or the Compensation Committee of the Board determines, in its sole discretion to pay up to, but not more than, 50% of such bonus in fully vested RSUs.  In the event that Mr. Long is terminated without “cause” or resigns for “good reason” (as such terms are defined in the employment agreement), Mr. Long will be entitled to severa nce equal to his then current salary for a period of six months following the date of termination, certain benefits for such six-month period and a prorated bonus for the year in which he is terminated.

Mr. Kennedy will serve as Chief Operating Officer of the Company.  Immediately prior to joining the Company, Mr. Kennedy, age 52, was, and continues to be, a principal in Yardley Capital Advisors, LLC.  From October 2008 until May 2010, Mr. Kennedy served as Chief Operating Officer of Excelus HR, Inc.  From July 2003 until June 2007, Mr. Kennedy served as Executive Vice President, Operations of First Advantage Corporation.  From January 2003 until February 2006, Mr. Kennedy served as President of First Advantage’s Background Verification group.  Mr. Kennedy will earn an initial base salary of U.S.$125,000.  Upon entering into the employment agreement, Mr. Kennedy received 10,174,399 RSUs and options to purchase 5,087,200 common shares exercisable at a price of $0.01977 per share.  Such RSUs and options vest in equal quarterly installments beginning on the three month anniversary of the date of grant; provided, however, that upon a “change of control” (as defined in the employment agreement), all unvested RSUs and options shall automatically vest.  Mr. Kennedy is also eligible to receive an annual bonus for each fiscal year of up 100% of his base salary based on achieving certain goals, which are to be mutually agreed upon, including a prorated bonus for the fiscal year ending May 31, 2010.Such bonus will be payable in cash unless the Board of Directors of the Company or the Compensation Committee of the Board determines, in its sole discretion to pay up to, but not more than, 50% of such bonus in fully vested RSUs.  In the event that Mr. Kennedy is terminated without “cause” or resigns for “good reason” (as such terms are defined in the employment agr eement), Mr. Kennedy will be entitled to severance equal to his then current salary for a period of six months following the date of termination, certain benefits for such six-month period and a prorated bonus for the year in which he is terminated.

Mr. Schneier will serve as Corporate Development Officer.  Immediately prior to joining the Company, Mr. Schneier, age 49, was, and continues to be, a principal in Yardley Capital Advisors, LLC.  From October 2008 until May 2010, Mr. Schneier served as Vice President of Corporate Development of Excelus HR, Inc.  From July 2003 until June 2007, Mr. Schneier served as Vice President of Corporate Development for First Advantage Corporation.  Mr. Schneier will earn an initial base salary of U.S.$125,000.  Upon entering into the employment agreement, Mr. Schneier received 10,174,399  RSUs and options to purchase 5,087,200 common shares exercisable at a price of $0.01977 per share.  Such RSUs and options vest in equal quarterly installments beginning on the three month annive rsary of the date of grant; provided, however, that upon a “change of control” (as defined in the employment agreement), all unvested RSUs and options shall automatically vest.  Mr. Schneier is also eligible to receive an annual bonus for each fiscal year of up 100% of his base salary based on achieving certain goals, which are to be mutually agreed upon, including a prorated bonus for the fiscal year ending May 31, 2010.Such bonus will be payable in cash unless the Board of Directors of the Company or the Compensation Committee of the Board determines, in its sole discretion to pay up to, but not more than, 50% of such bonus in fully vested RSUs.  In the event that Mr. Schneier is terminated without “cause” or resigns for “good reason” (as such terms are defined in the employment agreement), Mr. Schneier will be entitled to severance equal to his then current salary for a period of six month s following the date of termination, certain benefits for such six-month period and a prorated bonus for the year in which he is terminated.

Mr. Mullarkey, our former Chief Executive Officer, President and Chairman of the Board, will serve as Executive Vice President, Sales and Marketing.  Mr. Mullarkey will earn an initial base salary of U.S.$200,000.  Upon entering into the employment agreement, Mr. Mullarkey received a one-time bonus of $150,000 in cash payable in twelve equal monthly installments beginning on the five month anniversary of the date of the employment agreement and 7,587,249 fully vested RSUs.  In addition, Mr. Mullarkey received 8,139,519 RSUs and options to purchase 8,139,519 common shares exercisable at a price of $0.01977 per share.  Such RSUs and options vest in equal quarterly installments beginning on the three month anniversary of the date of grant; provided, however, that upon a “change of control” (as defined in the employment agreement), all unvested RSUs and options shall automatically vest.  In addition to his base salary, Mr. Mullarkey is entitled to receive a commission on software sales made by the Company resulting from his and his sales team’s efforts on terms agreed upon by Mr. Mullarkey and the Company.  In the event that Mr. Mullarkey is terminated without “cause” or resigns for “good reason” (as such terms are defined in the employment agreement), Mr. Mullarkey will be entitled to severance equal to his then current salary for a period of six months following the date of termination, certain benefits for such six-month period and a commissions earned but not yet paid.

A copy of the form of Exchange Agreement is attached as Exhibit 10.1.  A copy of the form of Stock purchase Agreement is attached as Exhibit 10.2.  A copy of the New Note is attached as Exhibit 10.3.  A copy of the Security Agreement is attached as Exhibit 10.4.  A copy of the Guaranty is attached as Exhibit 10.5.  A copy of Mr. Long’s employment agreement is attached as Exhibit 10.6.  A copy of Mr. Kennedy’s employment agreement is attached as Exhibit 10.7.  A copy of Mr. Schneier’s employment agreement is attached as Exhibit 10.8.  A copy of Mr. Mullarkey’s employment agreement is attached as Exhibit 10.9.  A copy of the Registration Rights Agreement is attached as Exhibit 4.1.  The descriptions contained herein ar e qualified by reference to the documents attached hereto.

On August 16, 2010, the Company issued a press release announcing the transactions described above. The full text of such press release is attached hereto as Exhibit 99.1.

Item 2.03  Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth under Item 1.01 “Entry into Material Agreement” is incorporated herein by reference.

Item 3.02.  Unregistered Sales of Equity Securities.

The information set forth under Item 1.01 “Entry into Material Agreement” is incorporated herein by reference.

Item 5.02.  Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

The information set forth under Item 1.01 “Entry into Material Agreement” is incorporated herein by reference.

In addition, in connection with the consummation of the transactions contemplated by the Exchange Agreements, on August 13, 2010, Thomas Danis and Mitch Tuchman resigned as members of the Board of Directors of the Company.  The Board of Directors appointed in their place Biju Kulathakal and Mr. Long.  Effective as of August 14, 2010, Mr. Mullarkey and Michael Gerrior resigned as members of the Board of Directors and Jeffrey Moss (Chairman) and Denis E. Sutton were appointed in their place.  Upon their appointment to the Board of Directors, each new member was granted 265,000 RSUs and options to purchase 1,350,000 common shares pursuant to the terms of the Company’s 2002 Amended and Restated Stock Option Plan.  The RSUs and options are exercisable on the one year anniversary of the date of thei r grant.

Item 9.01.  Financial Statements and Exhibits.

(d)   Exhibits

4.1 Third Amended and Restated Registration Rights Agreement dated August 13, 2010 among the Company and the Investors

10.1 Form of Exchange Agreement dated August 13, 2010 among the Company and each Investor

10.2 Stock Purchase Agreement dated August 13, 2010 among the Company and the New Management Team

10.3 Senior Secured Note in the original principal amount of $750,000 issued in favor of CCM Master Qualified Fund, Ltd.

10.4 Security Agreement dated as of August 13, 2010 among the Company, each subsidiary of the Company and CCM Master Qualified Fund, Ltd.

10.5 Guaranty dated August 13, 2010 among each subsidiary of the Company in favor of CCM Master Qualified Fund, Ltd.

10.6 Employment Agreement dated August 13, 2010 between the Company and John Long

10.7 Employment Agreement dated August 13, 2010 between the Company and David Kennedy

10.8 Employment Agreement dated August 13, 2010 between the Company and Ezra Schneier

10.9 Employment Agreement dated August 13, 2010 between the Company and Michael Mullarkey

99.1 Press release issued by the Company on August 16, 2010

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	WORKSTREAM INC.
Dated: August 18, 2010	By:	/s/ John Long
		Name: John Long Title: Chief Executive Officer

EX-4.1

Exhibit 4.1

THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

This THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of August 13, 2010, is by and among Workstream Inc., a corporation existing pursuant to the Canada Business Corporations Act (the “Company”), and the undersigned buyers (each, a “Buyer”, and collectively, the “Buyers”).

RECITALS

A.           The Company and the Buyers entered into that certain Transaction Agreement, dated as of July 25, 2007 (the “Existing Transaction Agreement”).

B.           Simultaneously with the consummation of the transactions contemplated by the Existing Transaction Agreement, the Company issued and sold to each Buyer (i) a Special Warrant (as defined in the Existing Transaction Agreement) which is convertible into Conversion Shares (as defined in the Existing Transaction Agreement) in accordance with the terms thereof and (ii) a Warrant (as defined in the Existing Transaction Agreement) which is exercisable to purchase Warrant Shares (as defined in the Existing Transaction Agreement) in accordance with the terms thereof.

C.           Various Triggering Events (as defined in the Special Warrant) occurred under the Special Warrant after its issuance, and the Company and the Buyers entered into the 2008 Exchange Agreements (as defined below) pursuant to which the Buyers exchanged their Special Warrant and Warrant (as defined in the Existing Transaction Agreement) for (i) 2008 Notes (as defined in the 2009 Exchange Agreements (as defined below)) and (ii) 2008 Warrants (as defined in the 2009 Exchange Agreements).

D.           Various events of default occurred under the 2008 Notes and the Company and the Buyers entered into the 2009 Exchange Agreements pursuant to which the Buyers exchanged their 2008 Notes (as defined in the 2009 Exchange Agreements) for 2009 Notes (as defined under the 2009 Exchange Agreements).

E.           The Company and the Buyers entered into the Exchange Agreements (as defined below) pursuant to which (i) the Buyers exchanged their 2009 Notes (as defined in the 2009 Exchange Agreements) for Common Shares (as defined below) and (ii) the Buyers purchased Common Shares from the Company in accordance with the terms of the Exchange Agreements (collectively, the “Buyer Common Shares”).

F.           Simultaneously with the consummation of the transactions contemplated by the Existing Transaction Agreement, the 2008 Exchange Agreements and the 2009 Exchange Agreements the Company and the Buyers executed and delivered the Registration Rights Agreement, dated as of August 3, 2007, and as amended and restated in its entirety on August 29, 2008 and again on December 11, 2009 (the “Existing Registration Rights Agreement”), pursuant to which the Company agreed to provide certain registration rights under the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder, an d applicable state securities laws.

D.           In connection with the consummation of the transactions contemplated under the Exchange Agreements (as defined below), the Company agreed to provide amended registration rights under the 1933 Act and applicable state securities laws with respect to the Registrable Securities (as defined below).

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree to amend and restate the Existing Registration Rights Agreement in its entirety as follows:

1.   Definitions

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Exchange Agreements (as defined below). As used in this Agreement, the following terms shall have the following meanings:

(a)“2008 Exchange Agreements” means, collectively, the separate exchange agreements, each dated as of August 29, 2008, entered into between the Company and each of the Buyers.

(b)“2009 Exchange Agreements” means, collectively, the separate exchange agreements, each dated as of December 11, 2009, entered into between the Company and each of the Buyers.

(c)“Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in Chicago, Illinois are authorized or required by law to remain closed.

(d)“Buyer Common Shares” has the meaning set forth in the Recitals.

(e)“Common Shares” means shares of common stock of the Company, no par value per share.   

(f)“Effective Date” means the date that the applicable Registration Statement has been declared effective by the SEC.

(g)“Effectiveness Deadline” means (i) with respect to the initial Registration Statement required to be filed to cover the resale by the Investors of the Registrable Securities the 100th calendar day after the Trigger Date (or the 130th calendar day after the Trigger Date in the event that such Registration Statement is subject to review by the SEC) and (b) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the 100th calendar day following the date on which the Company was required to file such additional Registration Statement (or the 130th calendar day after such date in the event that such Registration Statement is subject to review by the SEC).

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(h)“Exchange Agreements” means, collectively, the separate Exchange and Share Purchase Agreements, each dated as of August 13, 2010, entered into between the Company and each of the Buyers.

(i)“Filing Deadline” means (i) with respect to the initial Registration Statement required to be filed to cover the resale by the Investors of the Registrable Securities, the 40th calendar day after the Trigger Date and (ii) with respect to any additional Registration Statements that may be required to be filed by the Company pursuant to this Agreement, the date on which the Company was required to file such additional Registration Statement pursuant to the terms of this Agreement.

(j)“Investor” means a Buyer or any transferee or assignee of any Registrable Securities, Buyer Common Shares or 2008 Warrants (as defined in the 2009 Exchange Agreements), as applicable, to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee of any Registrable Securities, Buyer Common Shares or 2008 Warrants, as applicable, assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

(k)“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(l)“Prior Exchange Agreements” means, collectively, the 2008 Exchange Agreements and the 2009 Exchange Agreements.

(m)“register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415 and the declaration of effectiveness of such Registration Statement(s) by the SEC.

(n)“Registrable Securities” means (i) the Buyer Common Shares, (ii) the 2008 Warrant Shares (as defined in the 2008 Exchange Agreements) issued or issuable upon exercise of the 2008 Warrants (as defined in the 2009 Exchange Agreements) and (iii) any capital stock of the Company issued or issuable with respect to the Common Shares, the 2008 Warrant Shares or the 2008 Warrants, including, without limitation, (1) as a result of any share split, share dividend, recapitalization, exchange or similar event or otherwise and (2) shares of capital stock of the Company into which the Common Shares (as defined in the 2009 Exchange Agreements) are converted or exchanged and shares of capital stock of a Successor Entity (as defined in the 2008 Warrants) into which the Common Shares are converted or exchanged, without regard to any limitations on exercise of the 2008 Warrants; provided, however, that Registrable Securities shall not include any securities that have been previously sold pursuant to a registration statement filed under the Act or under Rule 144, or which have otherwise been transferred in a transaction in which the transferor’s rights under this Agreement are not assigned, or, as to any Holder, when any such Registrable Securities of such Holder are then eligible for sale pursuant to Rule 144(b)(1).

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(o)“Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the Registrable Securities.

(p)“Required Holders” means the holders of at least a majority of the Registrable Securities.

(q)“Required Registration Amount” means the sum of (i) Buyer Common Shares and (ii) the maximum number of 2008 Warrant Shares issued and issuable pursuant to the 2008 Warrants, in each case, as of the Trading Day (as defined in the 2008 Warrants) immediately preceding the applicable date of determination (without taking into account any limitations on exercise of the 2008 Warrants set forth therein), all subject to adjustment as provided in Section 2(d).

(r)“Rule 144” means Rule 144 promulgated by the SEC under the 1933 Act or any other similar or successor rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration.

(s)“Rule 415” means Rule 415 promulgated by the SEC under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

(t)“SEC” means the United States Securities and Exchange Commission.

(u)“Transaction Agreement” means the Existing Transaction Agreement, as amended and modified by the 2008 Exchange Agreements and the 2009 Exchange Agreements.

(v)“Trigger Date” means the first date on which the Required Holders request registration of the Registrable Securities.

2.   Registration.

(a)Mandatory Registration. Commencing on the Trigger Date, the Company shall prepare, and, as soon as practicable, but in no event later than the Filing Deadline, file with the SEC a Registration Statement on Form S-3 covering the resale of all of the Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a registration and reasonably acceptable to the Required Holders, subject to the provisions of Section 2(c). The Registration Statement prepared pursuant hereto shall register for resale at least the number of Common Shares equal to the Required Regi stration Amount as of the date such Registration Statement is initially filed with the SEC. The Registration Statement shall contain (except if otherwise directed by the Required Holders) the “Selling Shareholders” and “Plan of Distribution” sections in substantially the form attached hereto as Exhibit B; provided that the Company may make any changes to such sections as requested by the SEC so long as none of such changes are materially inconsistent with the form attached hereto as Exhibit Bor adversely affect any Investor (including, without limitation, any restrictions on the manner of disposition). The Company shall use its com mercially reasonable efforts to have such Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the applicable Effectiveness Deadline.  By 9:30 a.m. (New York City time) on the Business Day immediately following the Effective Date of the applicable Registration Statement, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement. Notwithstanding anything to the contrary contained in this Agreement, other than during an Allowable Grace Period, the Company shall ensure that, when filed and at all times while effective, each Registration Statement and the prospectus used in connection with such Registration Statement will disclose (whether directly or through incorporation by reference to other SEC filings to the extent permitted) all material information regarding the Company and its securities. In no event shall the Company includ e any securities other than Registrable Securities on any Registration Statement filed pursuant to Section 2(a) without the prior written consent of the Required Holders. The Company shall not after the date hereof until the Effective Date of the Registration Statement required to be filed pursuant to this Section 2(a) enter into any agreement providing any such right to any of its security holders.

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(b)Legal Counsel. CCM Master Qualified Fund, Ltd. shall have the right to select its own legal counsel to review and oversee, solely on its behalf, any registration pursuant to this Section 2 (“Legal Counsel”), which shall be Seward & Kissel LLP or such other counsel as thereafter designated by CCM Master Qualified Fund, Ltd.

(c)Ineligibility for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securiti es has been declared effective by the SEC.

(d)Sufficient Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) is insufficient to cover the resale of all of the Registrable Securities required to be covered by such Registration Statement, the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.  For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of Common Shares available for resale under the Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on exercise of the 2008 Warrants (and such calculation shall assume that the 2008 Warrants are then fully exercisable at the then prevailing applicable Exercise Price (as defined in the 2008 Warrants).

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(e)Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering the resale of all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before the Filing Deadline (a “Filing Failure”) (it being understood that if the Company files a Registration Statement without affording each Investor the opportunity to review and comment on the same as required by Section 3(c) hereof, the Company shall not be deemed to have satisfied this clause (i)(A) and such event shall be deemed to be a Filing Failure); or (B) not declared effective by the SEC on or before the applicable Effectiveness Deadline (an “Effectiveness Failure”) (it being understood that if on the Business Day immediately following the Effective Date the Company shall not have filed a “final” prospectus for such Registration Statement with the SEC under Rule 424(b) in accordance with Section 2(a) above (whether or not such a prospectus is technically required by such rule), the Company shall not be deemed to have satisfied this clause (i)(B) and such event shall be deemed to be an Effectiveness Failure); (ii) on any day after the Effective Date of such Registration Statement sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such Registration Statement (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a suspension or delisting of (or a failure to timely list) the Common Shares on its principal trading market or exchange, or to register a sufficient number of Common Shares) (a “Maintenance Failure”) (provided that if an Investor transfers its rights hereunder pursuant to Section 9 and the transferee requests inclusion in such Registration Statement which requires the Company under applicable law to file a post-effective amendment to such Registration Statement, then a Maintenance Failure shall not be deemed to have occurred solely with respect to the filing of such post-effective amendment only if the Company is using its commercially reasonable efforts to file such amendment and have such amendment declar ed effective as soon as practicable); or (iii) the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the 1934 Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) (a “Current Public Information Default”) as a result of which any of the Investors are unable to sell any Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions), then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying Common Shares (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one half of one percent (0.5%) of the sum of (x) the aggregate principal amount of the 2009 Notes (as defined in the 2009 Exchan ge Agreements that were exchanged under the applicable holder’s Exchange Agreement and (y) the purchase price paid for the Common Shares purchased by such holder under such holder’s Exchange Agreement (1) on the date of such Filing Failure, Effectiveness Failure, Maintenance Failure or Current Public Information Default, as applicable, and (2) on every thirty (30) day anniversary of (I) a Filing Failure until such Filing Failure is cured; (II) an Effectiveness Failure until such Effectiveness Failure is cured; (III) a Maintenance Failure until such Maintenance Failure is cured; and (IV) a Current Public Information Default until the earlier of (i) the date such Current Public Information Default is cured and (ii) such time that such public information is no longer required pursuant to Rule 144 (in each case, pro rated for periods totaling less than thirty (30) days); provided, however, that liquidated damages shall not be required to be paid with respect to those Registrable Securities which cann ot be registered under Rule 415 solely as a result of action by the SEC. The payments to which a holder shall be entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay Payments.” Following the initial Registration Delay Payment for any particular event or failure (which shall be paid on the date of such event or failure, as set forth above), without limiting the foregoing, if an event or failure giving rise to the Registration Delay Payments is cured prior to any thirtieth (30th) day anniversary of such event or failure, then such Registration Delay Payment shall be made on the third (3rd) Business Day after such cure. Notwithstanding anything contained in this Section 2(e) to the contrary, in no event shall the Registration Delay Payments exceed $1,000,000 .00 in the aggregate.

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(f)Offering. Notwithstanding anything to the contrary contained in this Agreement, but subject to the payment of the Registration Delay Payments pursuant to Section 2(e), in the event the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities by or on behalf of the Company, or in any other manner, such that the Staff or the SEC does not permit such Registration Statement to become effective and used for resales in a manner th at does not constitute such an offering and that permits the continuous resale at the market by the Investors participating therein (or as otherwise may be acceptable to each Investor) without being named therein as an “underwriter,” then the Company shall reduce the number of shares to be included in such Registration Statement by all Investors until such time as the Staff and the SEC shall so permit such Registration Statement to become effective as aforesaid.  In making such reduction, the Company shall reduce the number of shares to be included by all Investors on a pro rata basis (based upon the number of Registrable Securities otherwise required to be included for each Investor) unless the inclusion of shares by a particular Investor or a particular set of Investors are resulting in the Staff or the SEC’s “by or on behalf of the Company” offering position, in which event the shares held by such Investor or set of Investors shall be the only shares subject to reduction (and if by a set of Investors on a pro rata basis by such Investors or on such other basis as would result in the exclusion of the least number of shares by all such Investors).  In addition, in the event that the Staff or the SEC requires any Investor seeking to sell securities under a Registration Statement filed pursuant to this Agreement to be specifically identified as an “underwriter” in order to permit such Registration Statement to become effective, and such Investor does not consent to being so named as an underwriter in such Registration Statement, then, in each such case, the Company shall reduce the total number of Registrable Securities to be registered on behalf of such Investor, until such time as the Staff or the SEC does not require such identification or until such Investor accepts such identification and the manner thereof. Any reduction pursuant to this paragraph will first reduce all Registrable Securities other than those issued pursuant to the Exchange Agreements and the Prior Exchange Agreements. In the event of any reduction in Registrable Securities pursuant to this paragraph, an affected Investor shall have the right to require, upon delivery of a written request to the Company signed by such Investor, the Company to file a registration statement within 30 days of such request (subject to any restrictions imposed by Rule 415 or required by the Staff or the SEC) for resale by such Investor in a manner reasonably acceptable to such Investor, and the Company shall following such request cause to be and keep effective such registration statement in the same manner as otherwise contemplated in this Agreement for registration statements hereunder, in each case until such time as: (i) all Registrable Securities held by such Investor have been registered and sold pursuant to an effective Registration Statement in a manner acceptable to such Investor or (ii) all Registrable Securities may be resold by such Investor without restriction (including volume limitations) pursuant to Rule 144 without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (iii) such Investor agrees to be named as an underwriter in any such Registration Statement in a manner acceptable to such Investor as to all Registrable Securities held by such Investor and that have not theretofore been included in a Registration Statement under this Agreement (it being understood that the special demand right under this sentence may be exercised by an Investor multiple times and with respect to limited amounts of Registrable Securities in order to permit the resale thereof by such Investor as contemplated above).

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(g)Piggyback Registrations. If, at any time during the period in which a Registration Statement is required to be kept effective, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans), then the Company shall deliver to each Investor a written notice of such determination and, if within fifteen (15) days after the date of the delivery of such notice, any such Investor shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Investor requests to be registered; provided, however, that the Company shall not be required to register any Registrable Securities pursuant to this Section 2(g) that are eligible for resale pursuant to Rule 144 (without volume restrictions) and without the requirement to be in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or that are the subject of a then effective Registration Statement. Any Registrable Securities of an Investor that are to be included in a registered public offering pursuant to this Section 2(g) shall be offered and sold upon such terms as the man aging underwriters thereof determine. The managing underwriters may condition an Investor’s participation in such a registered public offering upon such Investor’s execution of an underwriting agreement containing customary terms and conditions which would customarily be applicable to selling shareholders.  If the managing underwriters for a registered public offering determine that the number of Common Shares proposed to be sold in such offering would adversely affect the marketing of the Common Shares to be sold by the Company therein or by the Person or Persons who exercised their right to require the Company to register such offering under the 1933 Act, then the number of Common Shares to be included in such offering shall be reduced until the number of such shares does not exceed the number that the managing underwriters believe can be sold without any such adverse effects; provided that any shares to be excluded shall be so excluded in the following order of priority: (i) securiti es held by any Person or Persons other than (A) the Investors or (B) any Person or Persons who exercised their demand right to require the Company to register such offering under the 1933 Act and (ii) the Registrable Securities sought to be included by the Investors as determined on a pro-rata basis (based upon the aggregate number of Registrable Securities sought to be included in such registered offering).

3.   Related Obligations.

The Company will use its commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

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(a)Commencing on the Trigger Date, the Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities (but in no event later than the Filing Deadline) and use its commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). Subject to allowable Grace Periods (as defined below), the Company shall keep each Registration Statement effective pursuant to Rule 415 for sale on a continuous basis in an at-the-market offering at all times until the earlier of (i) the date as of which all of the Investo rs may sell all of the Registrable Securities required to be covered by such Registration Statement without volume limitations or any other restriction pursuant to Rule 144 and without the need for current public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the “Registration Period”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.  The Company shall submit to the SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the Staff or that the Staff has no further comments on a particular Registration Statement (as the case may be) and (ii) the approval of Legal Counsel is obtained pursuant to Section 3(c) (which approval shall be immediately sought), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than 48 hours after the submission of such request.

(b)Subject to Section 3(r) of this Agreement, the Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company required to be covered by such Registration Statement.  In the case of amendments and supplements to a Reg istration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q or Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

(c)The Company shall (A) permit Legal Counsel and legal counsel for each other Investor to review and comment upon (i) each Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel or any legal counsel for any other Investor reasonably objects. The Company shall not submit a request for accelera tion of the effectiveness of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which approval shall not be unreasonably withheld.  The Company shall furnish to Legal Counsel and legal counsel for each other Investor, without charge, (i) copies of any correspondence from the SEC or the Staff to the Company or its representatives relating to any Registration Statement, provided that such correspondence shall not contain any material, non-public information regarding the Company or any of its Subsidiaries (as defined in the Exchange Agreements), (ii) promptly after the same is prepared and filed with the SEC, one (1) copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of any Registratio n Statement, one (1) copy of the prospectus included in such Registration Statement and all amendments and supplements thereto. The Company shall reasonably cooperate with Legal Counsel and legal counsel for each other Investor in performing the Company’s obligations pursuant to this Section 3.

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(d)The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one (1) copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request from time to time) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(e)The Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.  The Company shall promptly notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or & #8220;blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

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(f)The Company shall notify Legal Counsel, legal counsel for each other Investor and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, non-public information regarding the Company or any of its Subsidiaries), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission and deliver ten (10) copies of such supplement or amendment to Legal Counsel, legal counsel for each other Investor and each Investor (or such other number of copies as Legal Counsel, legal counsel for each other Investor or such Investor may reasonably request). The Company shall also promptly notify Legal Counsel, legal counsel for each other Investor and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel, legal counsel for each other Investor and each Investor by facsimile or e-mail on the same day of such effectiveness and by overnight mail), and when the Company receives written notice from the SEC that a Registration Statement or any post-effective amendment will be reviewed by the SEC, (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.

(g)The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel, legal counsel for each other Investor and each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(h)If any Investor may be required under applicable securities law to be described in a Registration Statement as an underwriter and such Investor consents to so being named an underwriter, at the request of any Investor, the Company shall furnish to such Investor, on the date of the effectiveness of such Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such d ate, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

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(i)If any Investor may be required under applicable securities law to be described in a Registration Statement as an underwriter and such Investor consents to so being named an underwriter, upon the written request of such Investor, the Company shall make available for inspection by (i) such Investor, (ii) legal counsel for such Investor and (iii) one (1) firm of accountants or other agents retained by such Investor (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records 221;), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree in writing to hold in strict confidence and not to make any disclosure (except to such Investor) or use of any Record or other information which the Company’s Board of Directors determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement or any o ther related transaction document. Such Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and such Investor, if any) shall be deemed to limit any Investor’s ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(j)The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required to be disclosed in the Registration Statement pursuant to the 1933 Act, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by dis closure in violation of this Agreement or any other related transaction document. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(k)Without limiting any obligation of the Company under each of the Exchange Agreements, the Company shall use its commercially reasonable efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed or quoted on each securities exchange or quotation system on which securities of the same class or series issued by the Company are then listed or quoted, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or quotation system, or (ii) secure designation and quotation of all of the Registrable Securities covered by a Registration Statement on the OTC Bulletin Board, or (iii) if, despite the Company’s best eff orts to satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in satisfying the preceding clauses (i) or (ii), without limiting the generality of the foregoing, to use its commercially reasonable efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority (f/k/a the National Association of Securities Dealers, Inc.) as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(k).

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(l)The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts (as the case may be) as the Investors may reasonably request from time to time and registered in such names as the Investors may request.

(m)If requested by an Investor, the Company shall as soon as practicable after receipt of notice from such Investor and subject to Section 3(r) hereof, (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being noti fied of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

(n)The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o)The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the effective date of the Registration Statement.

(p)The Company shall otherwise use its best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(q)Within one (1) Business Day after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

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(r)Notwithstanding anything to the contrary herein (but subject to the last sentence of this Section 3(r)), at any time after the Effective Date of the applicable Registration Statement, the Company may delay the disclosure of material, non-public information concerning the Company or any of its Subsidiaries the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the Company shall promptly (i ) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of thirty (30) days and the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an “Allowable Grace Period”); provided, that no Allowable Grace Period may exist during the first sixty (60) Business Days after the Effective Date of the applicable Registration Statement.  For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of each Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, nonpublic information is no longer applicable.

4.   Obligations of the Investors.

(a)At least five (5) Business Days prior to the first anticipated filing date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect and maintain the effectiveness of the registration of such Regi strable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

(b)Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

(c)Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required.

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(d)Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

(e)Each Investor covenants and agrees to deliver a Registration Statement Questionnaire, in the form attached hereto as Exhibit C, no later than 15 calendar days after the Trigger Date (such later date, the “Outside Delivery Date”); provided that if such Investor fails to deliver such questionnaire by the close of business on the Outside Delivery Date, then such Investor’s Registrable Securities may be excluded from the Registration Statement by the Company.

5.   Expenses of Registration.

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. Each Buyer shall be responsible for the fees and disbursements of its own legal counsel in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement.

6.   Indemnification.

In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a)To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, members, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several, (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omissi on or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any

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material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). Subject to Section 6(b), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defendi ng any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of such Registration Statement or any such amendment thereof or supplement thereto and (ii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company (to the extent applicable), including a corrected prospectus, if such prospectus or corrected prospectus was timely made available by the Company pursuant to Section 3(d) and then only if, and to the extent that, following the receipt of the corrected prospectus no grounds for such Claim would have existed; and (i ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.

(b)In connection with any Registration Statement in which an Investor is participating, such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages ar ise out of or are based upon any Violation, in each case, to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(b), such Investor will reimburse any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that such Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of any of the Registrable Securities by any of the Investors pursuant to Section 9.

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(c)Promptly after receipt by an Indemnified Person or Indemnified Party (as the case may be) under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party (as the case may be) shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with co unsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party (as the case may be); provided, however, that an Indemnified Person or Indemnified Party (as the case may be) shall have the right to retain its own counsel with the fees and expenses of such counsel to be paid by the indemnifying party if: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such Claim and to employ counsel reasonably satisfactory to such Indemnified Person or Indemnified Party (as the case may be) in any such Claim; or (iii) the named parties to any such Claim (including any impleaded parties) include both such Indemnified Person or Indemnified Party (as the case may be) and the indemnifying party, and such Indemnified Person or such Indemnified Party ( as the case may be) shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Person or such Indemnified Party and the indemnifying party (in which case, if such Indemnified Person or such Indemnified Party (as the case may be) notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, then the indemnifying party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party, provided further, that in the case of clause (iii) above the indemnifying party shall not be responsible for the reasonable fees and expenses of more than one (1) separate legal counsel for such Indemnified Person or Indemnified Party (as the case may be). The Indemnified Party or Indemnified Person (as the case may be) shall reasonably cooperate with the indemnifying pa rty in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person (as the case may be) which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person (as the case may be) reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person (as the case may be), cons ent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person (as the case may be) of a release from all liability in respect to such Claim or litigation, and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person (as the case may be) with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party (as the case may be) under this Section 6, except to the extent that the indemnifying party is materially and adversely prejudiced in its ability to defend such action.

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(d)No Person involved in the sale of Registrable Securities who is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to indemnification from any Person involved in such sale of Registrable Securities who is not guilty of fraudulent misrepresentation.

(e)The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

(f)The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7.   Contribution.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6 of this Agreement, (ii) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale sh all be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement. Notwithstanding the provisions of this Section 7, no Investor shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Investor from the sale of the Registrable Securities subject to the Claim exceeds the amount of any damages that such Investor has otherwise been required to pay, or would otherwise be required to pay under Section 6(b), by reason of such untrue or alleged untrue statement or omission or alleged omission.

8.   Reports Under the 1934 Act

With a view to making available to the Investors the benefits of Rule 144, the Company agrees to:

(a)make and keep public information available, as those terms are understood and defined in Rule 144;

(b)file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Company’s obligations under Section 4(c) of the Exchange Agreements) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

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(c)furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144 and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company with the SEC if such reports are not publicly available via EDGAR, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

9.   Assignment of Registration Rights.

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicabl e state securities laws if so required; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; (v) such transfer shall have been made in accordance with the applicable requirements of the applicable Exchange Agreement; and (vi) such transfer shall have been conducted in accordance with all applicable federal and state securities laws.

10.   Amendment of Registration Rights.

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the Registrable Securities, provided that any Investor may give a waiver in writing as to itself. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company. No such amendment or waiver (unless given pursuant to the foregoing proviso) shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiv er or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

11.Termination.

This Agreement shall terminate and become wholly void and of no effect, as to any Holder, at such time as all of such Holder’s Registrable Securities are then eligible for sale pursuant to Rule 144(b)(1).

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12.   Miscellaneous.

(a)Solely for purposes of this Agreement, a Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

(b)Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (iii) with respect to Section 3(c), by electronic mail (provided confirmation of transmission is electronically generated and kept on file by the sending party); or (iv) one (1) Business Day after deposit with a nationally recognized overnight delivery service with next day delivery specified, in each case, properly addre ssed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

Workstream Inc.

485 N. Keller Road, Suite 500

Maitland, Florida 32751

Telephone:  (407) 475-5500

Facsimile:  (407) 475-5517

Attention:  CEO

With a copy (for informational purposes only) to:

Cozen O’Connor

1900 Market Street

Philadelphia, Pennsylvania  19103

Telephone: (215) 665-4141

Facsimile: (215) 665-2013

Attention: Michael J. Heller, Esq.

If to the Transfer Agent:

American Stock Transfer and Trust Company 

59 Maiden Lane

New York, NY 10038 

Telephone: (718)  921-8124 

Facsimile: (718) 921-8327

Attention: Joseph Comito 

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If to Legal Counsel:

Seward & Kissel LLP

One Battery Park Plaza

New York, New York 10004

Telephone: (212) 574-1200

Facsimile: (212) 480-8421

Attention:  Craig A. Sklar, Esq.

If to a Buyer, to its address and facsimile number set forth on such Buyer’s Exchange Agreement, with copies to such Buyer’s representatives as set forth thereon, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change, provided Seward & Kissel LLP shall only be provided notices sent to CCM Master Qualified Fund, Ltd. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or electronic mail transmission containing th e time, date, recipient facsimile number or electronic mail address and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(c)Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d)The parties hereby agree that pursuant to 735 Illinois Compiled Statutes 105/5-5 they have chosen that all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of Chicago, Cook County, for the adjudication of any dispute hereunder or in connectio n herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceabi lity of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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(e)This Agreement and the schedules and exhibits attached hereto and the instruments referenced herein and therein constitute the entire agreement among the parties hereto solely with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement and the schedules and exhibits attached hereto and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto solely with respect to the subject matter hereof and thereof.

(f)Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

(g)The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.”  The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

(h)This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.

(i)Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(j)All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

(k)The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party. Terms used in this Agreement but defined in the other related transaction documents shall have the meanings ascribed to such terms on the Closing Date (as defined in the Exchange Agreements) in such other related transaction documents unless otherwise consented to in writing by each Buyer.

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(l)This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than the Persons referred to in Section 6 and 7 hereof.

(m)The obligations of each Investor under this Agreement and the other related transaction documents are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any other related transaction documents. Nothing contained herein or in any other related transaction documents, and no action taken by any Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Inve stors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the related transaction documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by this Agreement or any of the other related transaction documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other related transaction documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Investor, and was done solely for the convenience of the Company and not bec ause it was required or requested to do so by any Investor. It is expressly understood and agreed that each provision contained in this Agreement and in each other related transaction documents is between the Company and an Investor, solely, and not between the Company and the Investors collectively and not between and among Investors.

[signature pages follow]

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

COMPANY:

WORKSTREAM INC.

By: ________________________

Name: ______________________

Title:  __________________

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:

CCM MASTER QUALIFIED FUND, LTD.

By: ________________________

Name: ______________________

Title:  __________________

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS

TALKOT FUND, L.P.

By: _______________________

By: _______________________

By: ________________________

Name: ______________________

Title:  __________________

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS

TOM AKIN IRA INDIVIDUAL ACCOUNT

By: ________________________

Name: ______________________

Title:  __________________

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS

CRESTVIEW CAPITAL MASTER, LLC

By: Crestview Capital Partners, LLC, its sole manager

By: ________________________

Name: ______________________

Title:  __________________

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS

CARPE DIEM PARTNERS LLC

By:  Carpe Diem Capital LLC

Its:   Investment Manager

By: ________________________

      Name:  John D. Ziegelman

Title:  President

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Third Amended and Restated Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS

MAGNETAR CAPITAL MASTER FUND, LTD

By:           Magnetar Financial LLC

Its:           Investment Manager

By:______________________________

Name:

Title:

SCHEDULE OF BUYERS

Buyer   Buyer Address and Facsimile Number Buyer’s Representative’s Address and Facsimile Number

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

______________________

______________________

______________________

Attention:  _____________

Re:           Workstream Inc.

Ladies and Gentlemen:

[We are][I am] counsel to Workstream Inc., a corporation existing pursuant to the Canada Business Corporations Act (the “Company”), and have represented the Company and its subsidiaries in connection with those certain separate Exchange and Share Purchase Agreements (the “Exchange Agreements”) entered into by and among the Company and the parties named therein (collectively, the “Holders”) pursuant to each of which the Company issued to each of the Holders shares (the “Holder Common Shares”) of common stock of the Company, no par value per share (the “Common Shares”) . Pursuant to the Exchange Agreements, the Company also has entered into a Third Amended and Restated Registration Rights Agreement with the Holders (the “Amended Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Registrable Securities (as defined in the Amended Registration Rights Agreement), including the Holder Common Shares and Common Shares issuable upon exercise of the 2008 Warrants (as defined in the those certain separate exchange agreements, each dated as of December 11, 2009, entered into between the Company and each of the Holders.), under the Securities Act of 1933, as amended (the “1933 Act”). In con nection with the Company’s obligations under the Amended Registration Rights Agreement, on ____________ ___, 20__, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities which names each of the Holders as a selling shareholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale un der the 1933 Act pursuant to the Registration Statement.

This letter shall serve as our standing opinion to you that the Holder Common Shares and the Common Shares underlying the 2008 Warrants are freely transferable by the Holders pursuant to the Registration Statement, subject to the prospectus delivery requirements of the 1933 Act, which the selling shareholders have agreed to comply with to the extent applicable and which we have assumed compliance with in issuing this letter. You need not require further letters from us to effect any future legend-free issuance or reissuance of such Common Shares to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated _________ __, 20__.

Very truly yours,

[ISSUER’S COUNSEL]

By:_____________________

CC:           [LIST NAMES OF HOLDERS]

EXHIBIT B

SELLING SHAREHOLDERS

The common shares being offered by the selling shareholders are those held by the selling shareholders and those issuable to the selling shareholders upon exercise of warrants. For additional information regarding the common shares held by the selling shareholders and the issuance of the warrants, see “Holder Common Shares and Warrants” above. We are registering the common shares in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the common shares and warrants, the selling shareholders have not had any material relationship with us within the past three years.

The table below lists the selling shareholders and other information regarding the beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder) of the common shares by each of the selling shareholders. The second column lists the number of common shares beneficially owned by each selling shareholder, based on its ownership of common shares and the warrants, as of ________, 20__, assuming exercise of the warrants held by the selling shareholders on that date, taking account of any limitations on exercise set forth therein.

The third column lists the common shares being offered by this prospectus by the selling shareholders.

In accordance with the terms of a registration rights agreement with the holders of the common shares and warrants, this prospectus generally covers the resale of the common shares and the number of common shares issuable upon exercise of the warrants, determined as if the outstanding warrants were exercised in full (without regard to any limitations on exercise contained therein) as of the trading day immediately preceding the date this registration statement was initially filed with the SEC.  Because the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus. The fourth column assumes the sale of all of the common shares offered by the selling shareholders pursuant to this pros pectus.

Under the terms of the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder or any of its affiliates to beneficially own a number of common shares which would exceed 4.99% or 9.99% (as applicable) of our common shares. The number of shares in the second column reflects these limitations. The selling shareholders may sell all, some or none of their shares in this offering.  See “Plan of Distribution.”

Name of Selling Shareholder	Number of Common Shares of Owned Prior to Offering	Maximum Number of Common Shares to be Sold Pursuant to this Prospectus	Number of Common Shares of Owned After Offering
			0

PLAN OF DISTRIBUTION

We are registering the common shares (i) owned by the selling shareholders and (ii) issuable upon the exercise of the warrants, in each case, to permit the resale of these common shares by the holders thereof from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the common shares. We will bear all fees and expenses incident to our obligation to register the common shares.

The selling shareholders may sell all or a portion of the common shares beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the common shares are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The common shares may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

·   on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

·   in the over-the-counter market;

·   in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

·   through the writing of options, whether such options are listed on an options exchange or otherwise;

·   ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

·   block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

·   purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

·   an exchange distribution in accordance with the rules of the applicable exchange;

·   privately negotiated transactions;

·   short sales made after the date the Registration Statement is declared effective by the SEC;

·   sales pursuant to Rule 144;

·   broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

·   a combination of any such methods of sale; and

·   any other method permitted pursuant to applicable law.

If the selling shareholders effect such transactions by selling common shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the common shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved).  In connection with sales of the common shares or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the common shares in the course of hedging in positions they assume.  The selling shareholders may also sell common shares short and deliver common shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge common shares to broker-dealers that in turn may sell such shares.

The selling shareholders may pledge or grant a security interest in some or all of the warrants or common shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the common shares from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the common shares in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial o wners for purposes of this prospectus.

The selling shareholders and any broker-dealer participating in the distribution of the common shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the common shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of common shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.

Under the securities laws of some states, the common shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the common shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that any selling shareholder will sell any or all of the common shares registered pursuant to the shelf registration statement, of which this prospectus forms a part.

The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the common shares by the selling shareholders and any other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the distribution of the common shares to engage in market-making activities with respect to the common shares.  All of the foregoing may affect the marketability of the common shares and the ability of any person or entity to engage in market-making activities with r espect to the common shares.

We will pay all expenses of the registration of the common shares pursuant to the registration rights agreement, estimated to be $[     ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, a selling shareholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling shareholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling shareholders will be entitled to contribution. We may be indemnified by the selling shareholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling shareholder specifically for use in this prospectus, in accordance with the related registration rights agreements, or we may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a part, the common shares will be freely tradable in the hands of persons other than our affiliates.

EXHIBIT C

WORKSTREAM INC.

(the “Company”)

QUESTIONNAIRE TO THE SELLING SHAREHOLDERS

This Questionnaire is to be completed, signed and faxed to Scott Brucker, Esquire at (215) 701-2410 by no later than fifteen (15) calendar days after the Trigger Date, by the person or entity indicated on the cover of this Questionnaire (the “Selling Shareholder”) whose common shares of the Company are being registered pursuant to a Registration Statement on Form S-3. Retain a duplicate copy for your files.  If you do not return the Questionnaire by the foregoing deadline, your shares may not be included in the Registration Statement.

If you are uncertain about any of the following questions as they apply to your situation, please supply all relevant facts.  Include separate sheets with details if necessary.  If you have any questions, please call Workstream’s counsel, Scott Brucker, Esquire, at (215) 665-3710.

Please notify me immediately if any of the information disclosed in your answers changes.  Please answer all questions. Indicate “none” or “not applicable” when appropriate.  Information should be given as of the date of this Questionnaire, even if previously reported to the Company.

IN ANSWERING THESE QUESTIONS, PLEASE REFER TO THE INSTRUCTIONS AT THE BEGINNING OF THIS QUESTIONNAIRE.

Name of Selling Shareholder: _________________________________

Instructions and Definitions

The following instructions and definitions are furnished to aid you in preparing your answers to this Questionnaire.

1. For purposes of this Questionnaire the term “Company” means Workstream Inc.

2. “Beneficial” ownership.  Beneficial ownership shall have the meaning ascribed to it in Section 13(d) of the Securities Exchange Act of 1934, as amended.  The SEC has taken the position that if you have sole or shared voting power or dispositive power or the ability to acquire either sole or shared voting or dispositive power of a security within 60 days, you are the beneficial owner of that security, even though that security is not registered in your name.  Thus, for example, you could be the beneficial owner of securities in a trust or estate of which you are a trustee or executor, or of which you are one of the trustees or executors, or you could be the beneficial owner of securities which you have a right to purchase.

3. The term “affiliate” for purposes of this Questionnaire means any person directly or indirectly controlling, controlled by, or under common control with the Selling Shareholder.

4. An example response has been provided to assist you in preparing your response.

1.           Broker-Dealer Status.

(a)           Are you, or are you an affiliate of, a broker-dealer registered under the Securities Exchange Act of 1934?

Yes   ____                                                      No   ____

If “yes,” please give details below.

(b)           Please confirm the following statement:  The Company’s equity securities that are being issued to you were acquired in the ordinary course of your business, and at the time the securities were issued to you, you did not have any agreement or understanding, directly or indirectly, with any person to distribute the securities.

Confirmed   ____                                           Cannot Confirm   ____

If “cannot confirm,” please give details below.

2.           Relationships with the Company.

(a)           Have you held any position or office with the Company, its predecessors or affiliates within the last three years?

Yes   ____                                                      No   ____

If “yes,” please give details below.

(b)           Have you had any other material relationship with the Company, its predecessors or affiliates within the last three years?

Yes   ____                                                      No   ____

If “yes,” please give details below.

3.           Equity Securities Owned By You.

(a)           Please state the number and type of equity securities of the Company  owned (please see instructions and definitions on page 2) by you as of the date of this Questionnaire, including securities which are exercisable or convertible into equity securities within 60 days of the date of this Questionnaire.

Class of Security                                                                  Number of Shares Owned

(b)           If any natural person or entity other than you holds or shares voting power or dispositive power with respect to the Company’s equity securities listed in response to Question 3(a), please provide the names of the natural persons (including titles) or entities that hold or share such voting power or dispositive power and indicate the number of the Company’s equity securities covered thereby.

(c)           With respect to the Company’s equity securities listed in response to Questions 3(a) and 3(b) for which an entity holds or shares voting power or dispositive power, please provide the names of the natural persons (including titles) or entities that control the entity or entities listed in response to Questions 3(a) and 3(b).

(d)           Please continue to list the natural persons or entities that control the entities listed in response to Question 3(c) and the entities listed in response to this Question 3(d) until you have listed only natural persons (including titles) that control the applicable entity or entities.

(e)           If any person or entity disclaims beneficial ownership of any of the equity securities you have listed in response to Question 3, please so indicate:

EXAMPLE RESPONSE

The following is an example of a response to items 1 through 3.  Please assume ABC Corporation is the Selling Shareholder for purposes of this example.

1.           Broker-Dealer Status.

ABC Corporation is an affiliate of a broker-dealer because its sole shareholder, DEF Corporation, is a broker-dealer.

2.           Relationships with the Company.

(a)           ABC Corporation has not held any position or office with the Company, its predecessors or affiliates within the last three years.

(b)           ABC Corporation provided consulting services to the Company in March 2002.

3.            Equity Securities Owned By You.

Question 3(a).

Class of Security	Number of Shares Owned
Common Shares	100,000
Warrants to purchase Common Shares	200,000

Question 3(b).

Not applicable

Question 3(c).

ABC Corporation is controlled by DEF Corporation, ABC Corporation’s sole shareholder.

Question 3(d).

DEF Corporation is controlled by XYZ Corporation, DEF Corporation’s sole shareholder. XYZ Corporation is controlled by John Doe, XYZ Corporation’s sole shareholder and its President and Chief Executive Officer.

Question 3(e).

John Doe disclaims beneficial ownership of the 100,000 Common Shares and the Warrants to purchase 200,000 Common Shares.

The undersigned hereby acknowledges that the information contained herein is true to the best of his knowledge and will notify the Company immediately of any changes in such information.

DATED: __________, 2010                                          FOR INDIVIDUALS:

________________________________

Name of Selling Shareholder [please print]

________________________________

Signature

FOR CORPORATIONS, PARTNERSHIPS OR TRUSTS:

________________________________

Name of Selling Shareholder [please print]

By:_____________________________

                  Signature

Name:___________________________  

                      [please print]

Title:____________________________

              [please print]

EX-10.1

EX-10.2

Exhibit 10.2

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”) is entered into as of the 13th day of August, 2010, by and between WORKSTREAM INC., a Canadian corporation (the “Company”), and JWL INVESTMENTS LLC, a Delaware limited liability company, DAVID KENNEDY and EZRA SCHNEIER  (each, an “Investor” and collectively, the “Investors”).

Background

WHEREAS, the Investors desires to purchase from the Company, and the Company desires to sell to the Investors, common shares, no par value, of the Company (the “Common Stock”).

NOW, THEREFORE, in consideration of the mutual agreements, undertakings and covenants herein contained, the parties, intending to be legally bound hereby, agree as follows:

1.           Purchase and Sale.  Subject to the terms and conditions of this Agreement and in reliance upon the representations of the Company and the Investors contained herein, each Investor hereby subscribes for and purchases from the Company, and the Company hereby sells to each Investor, such number of shares of Common Stock set forth opposite such Investor’s name on Schedule I hereto (all such shares, collectively, the “Shares”). The aggregate purchase price for the Shares shall be Five Hundred Thousand Dollars ($500,000) (the “Purchase Price”) and each Investor shall be res ponsible for paying the Company, by wire transfer of immediately available funds, such portion of the Purchase Price as is set forth opposite such Investor’s name on Schedule I hereto.

2.           Payment and Delivery.  Upon receipt of the aggregate Purchase Price and, subject to the terms and conditions hereof, the Company will deliver to each Investor, promptly following the date hereof, a stock certificate duly executed by the Company, registered in the name of such Investor and dated the date hereof representing the Shares purchased by such Investor from the Company.

3.           Representations and Warranties of the Company.  The Company hereby represents and warrants to each Investor as follows:

(a)           Subsidiaries.  All of the majority owned direct and indirect subsidiaries of the Company are set forth on Schedule 3(a) (the “Subsidiaries”).  The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary.

(b)           Organization and Qualification.  Each of the Company and the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation or

default of any of the provisions of its respective articles or certificate of incorporation, by-laws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of this Agreement, (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement (any of (i), (ii) or (iii), a “Material Adverse Effect”).

(c)           Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement.  The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company.  This Agreement has been duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by general equ itable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution may be limited by applicable law.

(d)           No Conflicts.  The execution, delivery and performance of this Agreement by the Company and the issuance and sale of the Shares do not and will not (i) conflict with or violate any provision of the Company’s certificate of incorporation or by-laws, or (ii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the case of clause (ii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(e)           Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other party in connection with the execution, delivery and performance by the Company of this Agreement, other than the filing of Form D with the Securities and Exchange Commission and such filings as are required to be made under applicable state securities laws.

(f)           Issuance of Shares.  The Shares issued pursuant to this Agreement are duly authorized and when issued and paid for in accordance with this Agreement will be duly and validly issued, fully paid and nonassessable, free and clear of all liens imposed by the Company other than restrictions on transfer provided for herein or by law.

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(g)           Capitalization.  The capitalization of the Company is as described on Schedule 3(g).  No person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement.  The issue and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any person (other than the Investor).  All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all feder al and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares.

(h)           SEC Reports; Financial Statements.  The Company has filed all reports required to be filed by it under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto, being collectively referred to herein as the “SEC Reports”).  As of their respective dates, the SEC Reports complied in all material respects with the requirements of th e Securities Act and the Exchange Act.  As of their respective dates, the financial statements of the Company included in the SEC Reports complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material, either individually or in the aggregate).

(i)           Litigation.  Except as set forth in the SEC Reports and on Schedule 3(i), there is no action, suit or proceeding pending or, to the knowledge of the Company, threatened against the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.

(j)           Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.

(k)           Patents and Trademarks.  The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has received a written notice that the

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Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any third party.  To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another third party of any of the Intellectual Property Rights of others.

(l)           Transactions With Affiliates and Employees.  Except as set forth in the SEC Reports, to the knowledge of the Company, none of the officers or directors of the Company are presently a party to any material transaction with the Company or any Subsidiary (other than for services as employees, officers and directors).

(m)           Certain Fees.  No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other person with respect to the transactions contemplated by this Agreement.  The Purchasers shall have no obligation (other than with respect to their own actions) with respect to any fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.

(n)           Registration of Common Stock.  The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.

(o)           Title to Property.  Except as set forth on Schedule 3(o), the Company has good and marketable title to, or a valid leasehold interest in, its material property and assets, free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets.

(p)           Compliance with Laws.  The Company is in compliance with all laws and ordinances and all governmental rules and regulations to which it is subject, except where the failure so to comply would not have a Material Adverse Effect.

(q)           Taxes.  As of the date hereof, except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary have filed all necessary federal, state and foreign income, and franchise tax returns and have paid or accrued all taxes shown as due thereon, except for filings that are subject to extensions and amounts that are otherwise in dispute.

(r)           Employment Arrangements.  Except as set forth on Schedule 3(r), as of the date of this Agreement the Company is not a party to any employment agreement with any of its employees.  The Company has provided the Investors with a true and correct copy of each employment agreement listed on Schedule 3(r).  All of the employees of the Company other than employees covered by employment agreements are employed on an at-will basis.  The Company is not a party to any union agreement or collective bargaining agree ment, and each Company is in compliance in all material respects with all laws respecting employment and employment

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practices, terms and conditions of employment and wages and hours.  The Company has no knowledge of any union organizing activity involving the Company’s employees.  The Company and its subsidiaries believe that their relations with their employees are good.  To the Company’s knowledge, all of the Company’s employees have lawful status to work in the United States.

(s)           Insurance.  The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against risk, including directors’ and officers’ liability risk, in such amounts as management of the Company believes to be prudent and customary.

4.           Representations and Warranties of the Investors.  Each Investor, severally as to itself and not jointly, hereby represents and warrants to the Company as follows:

(a)           Authorization and Power.  JWL Investments LLC is a limited liability company duly organized and existing under the laws of the State of Delaware.  Such Investor has the requisite limited liability power, and is authorized, and each other Investor has the power and is authorized, to enter into this Agreement, to purchase the Shares hereunder and to carry out and perform its obligations under the terms of this Agreement.  This Agreement has been duly and validly executed and delivered by such Investor and constitutes the legal, valid and binding obligation of such Investor, enforceable against it in accordance with its terms, subject as to en forcement to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general equitable principles.

(b)           Investment Purposes.  Such Investor is acquiring the Shares for investment purposes only, for such Investor’s own account and with such Investor’s own funds and not for the account or with the funds of any other person and not with a view to the resale, assignment, fractionalization or distribution thereof, either in whole or in part and not with a view to resale or distribution to others.  Such Investor has no present plans to enter into any contract, undertaking, agreement or arrangement for the transfer, assignment, resale or distribution of the Shares.  Such Investor is not participating, either directly or indirectly, in an underwriting of the Shares and will not take, or cause to be taken, any action that would cause the Investor to be deemed to be an underwriter of the Shares as defined in Section 2(11) of the Securities Act of 1933, as amended (the “Act”).

(c)           Restrictions on Transfer.  Such Investor understands that the Shares have not been registered under the Act or under any state securities or blue sky laws and, as a result thereof, are subject to substantial restrictions on transfer.  Such Investor acknowledges that the Shares must be held indefinitely and that the Shares may not be sold or otherwise transferred unless the Shares (i) have been registered for resale under the Act and any applicable state securities laws or (ii) are transferred in reliance upon applicable exemption from registration.

(d)           Approvals.  Such Investor understands that no federal or state agency or regulatory body, including, without limitation, any federal or state securities commission, has approved or disapproved the Shares or passed upon or endorsed the merits of the offer and sale of the Shares pursuant to this Agreement.

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(e)           Risks.  Such Investor understands that an investment in the Shares involves a high degree of risk, including loss of the total investment, lack of liquidity and restrictions on transfer of the Shares.  In this regard, such Investor has read, understands and is familiar with the Risk Factors set forth in the SEC Reports (the “Risk Factors”), is familiar with the nature of the risks associated with acquiring securities of a company similarly situated with the Company, and has determined that the purchase of the Shares is consistent with the Investor’s investment objectives.  Such Investor has consulted with its own legal, ac counting, tax, investment and other advisors with respect to the merits and risks of an investment in the Shares.

(f)           Company Condition.  Such Investor has carefully reviewed the SEC Reports and has relied solely upon the SEC Reports and investigations made by or on behalf of the Investor in making the decision to purchase the Shares.  Such Investor acknowledges that it is familiar with the condition of the Company, financial and otherwise, and with its business operations and prospects, including the information contained in the Risk Factors, and further acknowledges that such Investor and the Investor’s advisors have been provided with or have been given access to all of the financial and any other information requested by them or deemed by them to be necess ary or material for the Investor to make the investment decision to acquire the Shares.  Such Investor acknowledges that it has been granted the opportunity to ask questions of and has received answers satisfactory to it from representatives of the Company concerning the business and operations of the Company and the Company warrants that the information provided to the investors is true and correct.

(g)           Accredited Investor.  Such Investor is an “accredited investor” as such term is defined in Rule 501 of the Act.

(h)           Use of Proceeds.  Such Investor understands and acknowledges that the proceeds from the sale of the Shares will be used by the Company for working capital and general corporate purposes, including payment of the costs incurred by the Company in connection with the preparation of the original Term Sheet, this Agreement, the Employment Agreements (as hereinafter defined), the exchange agreements between the Company and its secured note holders and all documents contemplated in connection with the transactions thereunder.

(i)           Exemption from Registration.  Such Investor understands that the Shares are being offered and sold in reliance upon specific exemptions from the registration requirements of the Act and state securities laws, and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings set forth herein in order to determine the applicability of such exemptions and the suitability of the Investor to acquire the Shares.  The representations and warranties made by such Investor hereunder shall survive the delivery of this Agreement and the purchase by the Investor of the Shares subscribed for hereunder.

(j)           Experience of Investor.  Such Investor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment.  Such Investor is able to

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bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.

(k)           General Solicitation.  Such Investor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

5.           Legend.  Each Investor understands that certificates evidencing the Shares shall bear a legend in substantially the following form:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE.  THE SECURITIES MAY NOT BE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS.

6.           Covenants.

(a)           Employment Agreements.  Simultaneous with the execution and delivery of this Agreement, the Company agrees that it will, and the Investor agrees that it will cause each of John Long, David Kennedy and Ezra Schneier to, execute the relevant employment agreements in the forms set forth as Exhibit A, Exhibit B and Exhibit C hereto (collectively, the “Employment Agreements”).  Each of the Company and the Investor agrees that this Agreement shall becom e effective and binding on the parties only upon the execution and delivery each of the Employment Agreements.

7.           Miscellaneous.

(a)           Confidentiality.  The Investor agrees to maintain the confidentiality of any non-public information relating to the Company or the business conducted by the Company that is received from the Company (“Confidential Information”) for a period of five years after its disclosure.  Except as otherwise agreed to by the parties, the Investor shall use such Confidential Information solely for purposes related to its investment in the Company and it may not use any such Confidential Information for the purpose of or in connection with the trading of any of the Company’s securities, including the Common Stock.  Confidential Informat ion shall not be deemed to include any of the following: (a)  information that now or later becomes generally known or available through no act or omission on the part of the Investor; (b)  information which the Investor can document was already known to the receiving party at the time it is disclosed to the Investor, other than as a result of a breach of confidentiality obligation by another party; (c)  information which the Investor can document was independently developed by the Investor without reference to the Confidential Information provided; or (d)  information properly disclosed to the Investor by a third party without breach of any obligation to the party who owns the Confidential Information.  The Investor may disclose Confidential Information of the

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Company pursuant to legally compelled disclosure or in the course of a legal proceeding or action involving the Company.

(b)           Notices.  All notices, requests and other communications to any party under this Agreement shall be in writing and shall be given to such party at its address or facsimile number set forth below or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties.  Each such notice, request or other communication shall be effective: (a) if given by facsimile, when such facsimile is transmitted to the facsimile number with confirmation of receipt, (b) if given by registered or certified mail, return receipt requested, three business days after such communication is deposited in the mail with post age prepaid, addressed as aforesaid or (c) if given by any other means, when delivered at the address specified hereunder.

If to the Investors:	_____________________________ _____________________________ _____________________________ Facsimile: _____________________
With a copy to:	_____________________________ _____________________________ _____________________________ Attention: ___________________ Facsimile: ____________________
If to the Company:	Workstream Inc. 485 N. Keller Road, Suite 500 Maitland, FL 32751 Attention: Chairman of the Board Facsimile: (407) 475-5517
With a copy to:	Cozen O’Connor 1900 Market Street Philadelphia, PA 19103 Attention: Scott Brucker, Esq. Facsimile: (215) 665-2013

(c)           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and neither party may assign or transfer any of its rights or obligations hereunder without the consent of the other party.

(d)           Governing Law.  The rights of the parties hereto shall be determined under, governed by, and construed in accordance with the internal laws of the State of Delaware, without regard to principles of conflicts of law.  THE PARTIES HERETO HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE STATE OF DELAWARE IN CONNECTION WITH ANY

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ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT.  THE PARTIES HERETO HEREBY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 7(d) AND STIPULATE THAT SUCH COURTS SHALL HAVE IN PERSONAL JURISDICTION AND VENUE OVER EACH SUCH PARTY FOR THE PURPOSE OF LITIGATING ANY SUCH DISPUTE, CONTROVERSY OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

(e)           Cooperation.  From time to time hereafter, at the request of the Company, each Investor shall execute and deliver such other instruments or documents as may be reasonably requested by the Company to more fully vest and perfect title to the Shares and all rights thereunder.

(f)           Entire Agreement.  This Agreement and the documents executed and delivered pursuant hereto and in connection herewith constitute the entire agreement between the parties with respect to the subject matter contained herein and supersedes all prior and contemporaneous oral and written communications and agreements with respect thereto.

(g)           Severability.  In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall to the extent practicable be modified so as to make it valid, legal and enforceable and to retain as nearly as practicable the intent of the parties, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(h)           Amendments and Waivers.  Any provision of this Agreement and the obligations of the Company or rights of the Investor hereunder may be amended or waived if, but only if, such amendment or waiver is in writing and is approved in writing by the Company and each of the Investors, whereupon such amendment or waiver shall be binding on the Company and the Investors.

(i)           Survival of Representations.  The representations and warranties made herein shall survive the execution and delivery hereof and the consummation of the transactions contemplated hereby until the twelve-month anniversary from the date hereof.

(j)           Fees and Expenses.  Each party shall pay the fees and expenses of its own advisers, counsel, accountants and other experts, if any, incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided, however, that promptly following the consummation of the transactions contemplated by this Agreement, the Company shall reimburse the legal fees and travel expenses incurred collectively by the Investors in connection with the negotiation, execution, delivery and performance of this Agreement, not to exceed $10,000 in the aggregate.

(k)           Construction.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.  The language used in this Agreement will be deemed to be the language

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chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

(l)           Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall constitute an original but all of which shall constitute but one and the same instrument.  One or more counterparts of this Agreement may be delivered via facsimile or PDF or similar electronic delivery, with the intention that they shall have the same effect as an original counterpart hereof.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

WORKSTREAM INC.

By: ___________________________________

      Name:

      Title:

JWL INVESTMENTS LLC

By: ___________________________________

      Name:

      Title:

_______________________________________

 DAVID KENNEDY

_______________________________________

 EZRA SCHNEIER

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SCHEDULE I

Investor	Purchase Price	Shares
JWL Investments LLC	$250,000	12,645,414
David Kennedy	$125,000	6,322,707
Ezra Schneier	$125,000	6,322,707

EX-10.3

Exhibit 10.3

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THIS NOTE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING ANYTHING CONTAINED IN THIS NOTE TO THE CONTRARY, THIS NOTE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TER MS OF THIS NOTE, INCLUDING SECTION 13(a) HEREOF.

Workstream Inc.

Senior Secured Note

Issuance Date:  August 13, 2010 Original Principal Amount: U.S. $750,000

FOR VALUE RECEIVED, Workstream Inc., a corporation existing pursuant to the Canada Business Corporations Act (the “Company”), hereby promises to pay to the order of CCM MASTER QUALIFIED FUND, LTD. or its registered assigns (“Holder”) the amount set out above as the Original Principal Amount (as increased or reduced pursuant to the terms hereof, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable (including, without limitation, on the Maturity Date) or acceleration, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section 25.

1.           PAYMENTS OF PRINCIPAL. The Company shall pay to the Holder in cash, via wire transfer of immediately available funds, the outstanding Principal, all accrued and unpaid Interest and all accrued and unpaid Late Charges (each such amount is referred to herein as a “Payment Amount”) on the Maturity Date or on such earlier date as any such amount becomes due and payable pursuant to the terms of this Note. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid Late Charges (as defined below) on Principal and Interest, if any. Each Payment Amount shall be applied as follows: (i) first, to the Principal amount due on such Payment Date, (ii) second, to all accrued and unpaid Interest due on such Payment Date and (iii) third, to all accrued and unpaid Late Charges on such Principal amount and Interest due on such Payment Date. The Holder and the Company shall maintain records showing the Principal,

Interest and Late Charges redeemed and/or paid (as the case may be) and the dates of such redemption and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon partial redemption or payment.

2.           INTEREST; INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date, shall accrue daily at the Interest Rate on the outstanding Principal amount from time to time, shall be computed on the basis of a 360-day year, shall compound each Fiscal Quarter and shall be paid by adding such accrued interest to the Principal amount outstanding under this Note on the first calendar day of each Fiscal Quarter, provided that all accrued and unpaid Interest outstanding on the Maturity Date shall be paid to the Holder in cash via wire transfer of immediately available funds. From and after the occurrence and during the continuance of any Event of Default, the Interest Rate then in effect shall be automatically increased to 15% per annum. In the event that such Event of Default is subsequently cured, the increase referred to in the preceding sentence shall cease to be effective as of the date of such cure, provided that the Interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.

3.           RIGHTS UPON EVENT OF DEFAULT.

(a)           Event of Default. Each of the following events that occurs after the Issuance Date shall constitute an “Event of Default”:

(i)      the Company’s or any Subsidiary’s (as defined below) failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation, the Company’s or any Subsidiary’s failure to pay any redemption payments or amounts hereunder), except in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure remains uncured for a period of at least seven (7) days;

(ii)     the Company or any Subsidiary materially breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant which is curable, only if such breach remains uncured for a period of at least ten (10) days;

(iii)    any breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 9 of this Note;

(iv)    the occurrence of any default under, redemption of or acceleration prior to maturity of any Indebtedness of the Company or its Subsidiaries in excess of $400,000;

(v)     any Material Adverse Effect;

(vi)    the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar

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law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thir ty (30) consecutive days;

(vii)   bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within thirty (30) days of their initiation;

(viii)  the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or t o the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law;

(ix)    except as set forth on Schedule 3(a)(ix), a final judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against the Company or any of its Subsidiaries, which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $1,000,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;

(x)    except as set forth on Schedule 3(a)(x), the Company or any Subsidiary either (i)

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fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $250,000 due to any third party, other than, with respect to unsecured Indebtedness only, payments contested by the Company or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP (as defined below), or otherwise be in breach or violation of any agreement for monies owed or owing in an amount in excess of $250,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a defa ult or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate; and

(xi)          the Company consummates a Fundamental Transaction without the prior written consent of the Holder, which consent may be granted or withheld in the Holder’s sole discretion.

(b)           Redemption Right. Upon the Company becoming aware of the occurrence of an Event of Default under this Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company (regardless of whether such Event of Default has been cured) to redeem all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to the sum of the portion of the Principal amount of this Note so elected by the Holder to be redeemed together with accrued and unpaid Interest with respect to such portion and accrued and unpaid Late Charges with respect to such portion and Interest as of such time as the Holder delivers an Event of Default Redemption Notice (the “Event of Default Redemption Price”). Redemptions required by this Section 3(b) shall be made in accordance with, and be subject to, the p rovisions of Section 7. To the extent redemptions required by this Section 3(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments.

4.           RIGHTS UPON FUNDAMENTAL TRANSACTION. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Holder gives its prior consent to such Fundamental Transaction, and (ii) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other Security Documents  in accordance with the provisions of this Section 4 pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder prior to such Fundamental Transaction.  Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such F undamental Transaction, the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power

4

of the Company and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a Fundamental Transaction, but in no event prior to the public announcement of such Fundamental Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction Notice”). Notwithstanding the foregoing, if a Disposition or L iquidity Event constitutes a Fundamental Transaction and such a Disposition or Liquidity Event (as the case may be) will result in payment in full of all amounts then-outstanding under this Note pursuant to Section 6, then the Company shall not be required to comply with Section 3(a)(xi) and this Section 4 in connection with such a Fundamental Transaction so long as all amounts then-outstanding under this Note are paid in full to the Holder pursuant to Section 6 simultaneously with the consummation of such Disposition or Liquidity Event (as the case may be).

5.           NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

6.           MANDATORY REDEMPTIONS. Upon the occurrence of each Disposition or Liquidity Event (as the case may be), the Company shall use the Net Proceeds (as defined below) with respect to such Disposition or Liquidity Event (as the case may be) (the “Applicable Net Proceeds”) to redeem this Note in the manner and in such amounts as are set forth herein (each being a “Mandatory Redemption”). With respect to each Disposition and each Liquidity Event (as the case may be), the Company shall deliver a written notice by confirmed facsimile and overnight courier (with next day delivery s pecified) to the Holder of this Note (the “Mandatory Redemption Notice” and the date such notice is delivered to the Holder is referred to as the “Mandatory Redemption Notice Date”) stating (a) the date on which the applicable Mandatory Redemption shall occur (the “Mandatory Redemption Date”), which date shall be the date such Disposition or Liquidity Event (as the case may be) is consummated, (b) the amount of Applicable Net Proceeds with respect to such Disposition or Liquidity Event (as the case may be) and (c) the Mandatory Redemption Price (as defined below) with respect to such Disposition or Liquidity Event (as the case may be).  The applicable Mandatory Redemption Notice shall be delivered as soon as practicable prior to the consummation of the applicable Disposition or Liquidity Event (as the case may be), and the Company shall make a public announcement containing the information set forth in such Mandatory Redemption Notice on or before the applicable Mandatory Redemption Notice Date to the extent that the notice contains any, or constitutes, material, non-public information. Redemptions required by this Section 6 shall be made in accordance with, and be subject to, the provisions of Section 7. To the extent redemptions required by this Section 6 are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The Company agrees that in the event of the Company’s redemption of any portion of this Note under this Section 6, the Holder’s damages would be

5

uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. “Mandatory Redemption Price” means, with respect to a particular Disposition or Liquidity Event (as the case may be), an amount in cash equal to the Applicable Net Proceeds with respect to such Disposition or Liquidity Event (as the case may be) up to the maximum aggregate amount owed under this Note, including all outstanding Principal, all accrued and unpaid Interest and all accrued and unpaid Late Charges.

7.           REDEMPTIONS.  The Company shall deliver the Event of Default Redemption Price to the Holder in cash within seven (7) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. The Company shall deliver the applicable Mandatory Redemption Price to the Holder in cash on the applicable Mandatory Redemption Date. In the event of a redemption of less than all of the then-outstanding Principal of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 13(d)) representing the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redem ption Price to the Holder within the time period, or on the date, required (as the case may be), at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Principal amount that was submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid by delivering written notice by confirmed facsimile and overnight courier (with next day delivery specified) stating such.  Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Principal amount and (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 13(d)) to the Holder representing the sum of such Principal amount to be redeemed which has not been redeemed. The Holder’s deliv ery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Principal amount subject to such notice.

8.           REDEMPTION AT OPTION OF THE COMPANY.

(a)          Right to Cause Redemption. The Company shall have the right, from time to time, to redeem all or any portion of the amount outstanding under this Note in accordance with, and subject to, the provisions of this Section 8 (the “Company Optional Redemption Right”).

(b)          Mechanics of Redemption at Option of the Company. With respect to each exercise of the Company Optional Redemption Right, the Company shall give written notice to the Holder that it has elected to redeem all or a portion of the amount outstanding under this Note pursuant to the exercise of the Company Optional Redemption Right (each being a “Notice of Company Optional Redemption”). Each Notice of Company Optional Redemption shall state (i) the date on which the applicable redemption shall occur (which date shall be a Business Day that is no less than five (5) Business Days after the date of such notice (the “Optional Redemption Date”)), and (ii) either that all or less than all of the amount outstanding under this Note is subject to such Company Optional Redemption Right, and if less than all of the amount outstanding under this Note will be subject to such Company Optional Redemption Right, the

6

portion of the amount outstanding under this Note subject to such Company Optional Redemption Right.

(c)          Payment of Optional Redemption Price. The redemption price with respect to each exercise of the Company Optional Redemption Right (each being an “Optional Redemption Price”) shall be determined as set forth in this Section 8(c). If the applicable Notice of Company Optional Redemption specifies that all amounts outstanding under this Note are subject to such redemption, then such Optional Redemption Price shall be an amount equal to 103% of the sum of the then-outstanding Principal amount of this Note plus all accrued and unpaid Interest with respect to such Principal amount and Interest as of the applicable Optional Redemption Date and all ac crued and unpaid Late Charges with respect to such Principal amount as of the applicable Optional Redemption Date. If the applicable Notice of Company Optional Redemption specifies that less than all amounts outstanding under this Note are subject to such redemption, then such Optional Redemption Price shall be an amount equal to 103% of the amount subject to redemption that is specified in the applicable Notice of Company Optional Redemption. Each Optional Redemption Price shall be paid in cash to the Holder, via wire transfer of immediately available funds, on the applicable Optional Redemption Date. Each Optional Redemption Price that is less than all amounts then-outstanding under this Note shall be applied as follows: (1) first, to the Principal then outstanding, (2) second, to all accrued and unpaid Interest then-outstanding and (3) third, to all accrued and unpaid Late Charges then-outstanding on such Principal and Interest. To the extent redemptions required by this Section 8 are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. In the event that the Company does not pay to the Holder the applicable Optional Redemption Price on the applicable Optional Redemption Date, then, in addition to all other rights and remedies available to the Holder, the Holder shall have the right to void the redemption pursuant to Section 7 with the term “Optional Redemption Price” being substituted for “Redemption Price” and “Notice of Company Optional Redemption” being substituted for “Redemption Notice.”

9.            COVENANTS.

(a)          Rank. All payments due under this Note shall be senior to all other Indebtedness of the Company and its Subsidiaries.

(b)          Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, without the prior express written consent of the Holder, incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note, (ii) Permitted Indebtedness and (iii) Indebtedness solely between or among the Company and any of its Subsidiaries.

(c)          Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, without the prior express written consent of the Holder allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

(d)          Restricted Payments. The Company shall not, and the Company shall cause each

7

of its Subsidiaries to not, directly or indirectly, without the prior express written consent of the Holder, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than Permitted Senior Indebtedness or Indebtedness solely between or among the Company and any of its Subsidiaries), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event of Default has occurred and is continuing or (ii) an event that with the passage of time and without b eing cured would constitute an Event of Default has occurred and is continuing. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, take any action or omit to take any action to cause, or that would result in, any amounts which would constitute Proceeds or Net Proceeds hereunder, if received directly or indirectly by the Company or any of its Subsidiaries, to either not (1) be received directly or indirectly by the Company or any of its Subsidiaries or (2) constitute Proceeds or Net Proceeds.

(e)          Restriction on Redemption and Dividends; Affiliate Transactions. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay or make any dividend or distribution (including, without limitation, a cash dividend or distribution) on its capital shares without the prior express written consent of the Holder, provided that the foregoing shall not prohibit any cash dividends or distributions by any Subsidiary solely to the Company or any other Subsidiary that is directly or indirectly wholly-owned by the Company.

(f)           Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, without the prior express written consent of the Holder (which consent shall not be unreasonably withheld (it shall be deemed reasonable for the Holder to withhold consent if Proceeds (directly or indirectly) received or to be received in connection with any Disposition include or constitute any consideration other than cash, cash equivalents or publicly-traded securities)), sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transac tions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries that, in the aggregate, do not have a fair market value in excess of $250,000 in any twelve (12) month period, (ii) sales of inventory in the ordinary course of business (such sales, leases, licenses, assignments, transfers, conveyances and other dispositions permitted by clauses (i) and (ii) are each referred to herein as a “Permitted Sale”) and (iii) leases and licenses of intellectual property of the Company and its Subsidiaries to unaffiliated third parties that are in the ordinary course of business and do not require approval of the board of directors or similar governing body of the Company or any of its Subsidiaries, provided that no such lease or license shall (1) provide for any exclusive use or right or other type of exclusivity, (2) transfer any ownership rights in any such intellectual property to any such third party, (3) exceed a term of three (3) years (including renewals thereof) or (4) result in a lease or license of all or substantially all of the assets of the Company or any of its Subsidiaries.  Notwithstanding the foregoing, this Section 10(f) shall not be applicable at any time after the Issuance Date the Holder holds less than $250,000 of the aggregate Principal amount of Indebtedness evidenced by this Note.

8

(g)          Maturity of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or  indirectly, without the prior express written consent of the Holder, permit any Indebtedness of the Company or any of the Subsidiaries (other than Permitted Senior Indebtedness) to mature or accelerate prior to the Maturity Date.

(h)          New Subsidiaries. Simultaneously with the acquisition or formation of each New Subsidiary (as defined below), the Company shall cause such New Subsidiary to execute, and deliver to the Holder of the Note, the Security Documents (and any documents and agreements relating thereto) that are substantially similar to the Security Documents (and other agreements, if applicable) that the Current Subsidiaries are required to execute in connection with this Note.

(i)           Tests.

  (A)           Minimum Cash Balance.  The Company shall at all times maintain a Cash Balance which equals or exceeds $250,000 (the “Minimum Cash Balance Test”).

  (B)           Primary Collateral Value.  As of the end of each calendar month, (i) the Company’s Cash Balance plus (ii) the Company’s consolidated accounts receivables that are less than 90 days old (collectively, the “Primary Collateral Value”) must be greater than or equal to two hundred percent (200%) of the aggregate amount of the outstanding Principal, Interest and Late Charges under this Note; provided, however, that at no time will the Primary Collateral Value be less than one hundred fifty percent (150%) of the aggregate amount  of the outstanding Principal, Interest and Late Charges under this Note (the “Primary Collateral Value Test”).

  (C)           Test Default.  Upon the Company becoming aware of the occurrence of any default under the Minimum Cash Balance Test or the Primary Collateral Value Test (each, a “Test Default”) under this Section 10(i), the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next day delivery specified) (a “Test Default Notice”) to the Holder.  If such Test Default remains uncured for a period of at least three (3) days after the earlier of the Holder’s receipt of a Test Default Notice or the Holder becoming aware of a Test Default, the Holder may require the Company to redeem all or any portion of this Note by delivering written notice thereof (the “Test Default Redemption Notice”) to the Company, which Test Default Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem.  Each such portion of this Note shall be redeemed by the Company at a price equal to the sum of the portion of the Principal amount of this Note so elected by the Holder to be redeemed together with accrued and unpaid Interest with respect to such portion and accrued and unpaid Late Charges with respect to such portion and Interest as of such time as the Holder delivers a Test Default Redemption Notice (the “Test Default Redemption Price”). Redemptions required by this Section 10(i) shall be mad e in accordance with, and be subject to, the provisions of Section 7.  To the extent redemptions required by this Section 10(i) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments.

(j)           No Material Weakness.  The Company and its Subsidiaries shall not have any material weakness in their control environments as reported by the Company’s auditors to the Company’s audit committee.

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10.          SECURITY. This Note is secured to the extent and in the manner set forth in the Security Documents.

11.          AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment to this Note.

12.          TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company.

13.          REISSUANCE OF THIS NOTE.

(a)          Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 13(d)), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 13(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 1 following payment or redemption (as the case may be) of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

(b)          Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 13(d)) representing the outstanding Principal.

(c)          Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 13(d) and in principal amounts of at least $50,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d)          Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 13(a) or Section 13(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the sa me as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date.

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14.          REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect t o payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

15.          PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without li mitation, attorneys’ fees and disbursements.

16.          FEES. The Company shall reimburse the Holder or its designee(s) for all costs and expenses incurred by it or its affiliates in connection with the transactions contemplated by this Note and the other Transaction Documents (including, without limitation, all legal fees and disbursements in connection therewith, documentation and implementation of the transactions contemplated by this Note and the other Transaction Documents and due diligence and regulatory filings in connection therewith), which amount shall be paid to the Holder by the Company by reducing the amount to be funded by the Holder to the Company under this Note.  The Company shall pay, and hold the Holder harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment.  In the event that this Note is collected by law or through attorneys at law, or under advice therefrom, the Company agrees to pay all costs of collection, including reasonable attorneys’ fees, whether or not suit is brought, and whether incurred in connection with collection, trial, appeal, bankruptcy or other creditors’ proceedings or otherwise.

17.          BOOKS AND RECORDS; REPORTS.

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(a)          Books and Records.  The Company shall keep, or arrange to have kept, full, accurate, complete, and proper books and records of all of the operations of the Company.  The books and records of the Company shall, at the cost and expense of the Company, be kept and cause to be kept by the Company at the principal office of the Company.  The Holder shall have the right, upon one (1) Business Day notice, to inspect the books and records of the Company. The Holder may either request to inspect the books and records during normal business hours at the principal place of business of the Company or demand that certain information be sent to the Holder, which in both instances the Company w ill produce the information in no less than two (2) Business Days.

(b)          Reports.   Upon the Holder’s request, the Company shall provide:

  (i)             within one (1) Business Day the following reports:

(A)  a summary of the Company’s consolidated Cash Balance with a detailed cash account ledgers and reconciliation to bank and/or custody accounts; and

(B)  a summary of the Company’s consolidated accounts receivable with detailed aging schedules; and

  (ii)            within five (5) Business Days of each calendar month-end, a detailed

balance sheet and income statement in accordance with GAAP with all supporting ledgers.

(c)          The Holder shall keep any information received under Section 17(b) confidential and will not trade in the Common Shares of the Company based on its knowledge of any such information in violation of federal and state securities laws, provided that the Holder may disclose such information to its directors, managers, officers, employees, consultants, and advisors.  The obligation to keep such information confidential shall not apply to any information that (i) was in the public domain prior to the time of its disclosure to the Holder, (ii) entered the public domain after the time of its disclosure to the Holder through means other than an unauthorized disclosure resulting from an act or omission by the Holder, (iii) was independently developed or discovered by the H older prior to the time of its disclosure to the Holder, (iv) is or was disclosed to the Holder at any time by a third party having no fiduciary relationship with the Company and having no obligation of confidentiality with respect to such information, or (v) is required to be disclosed to comply with applicable laws or regulations, or with a court or administrative order.

18.          CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents shall have the meanings ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the Holder.

19.          FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude

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other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

20.          DISPUTE RESOLUTION. In the case of a dispute as to the determination of the fair market value or the arithmetic calculation of any Redemption Price, the Company or the Holder (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt, or deemed receipt, of the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute, at any time after the Holder learned of the circumstances giving rise to such dispute. If the Holder and the Company are unable to agree upon such determination or calculation within two (2) Business D ays of such disputed determination or arithmetic calculation (as the case may be) being submitted to the Company or the Holder (as the case may be), then the Company shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the fair market value (as the case may be) to an independent, reputable investment bank selected by the Company and approved by the Holder (which approval shall not be unreasonably withheld) or (b) the disputed arithmetic calculation of the applicable Redemption Price (as the case may be) to the Company’s independent, outside accountant. The Company shall cause the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation (as th e case may be) shall be binding upon all parties absent demonstrable error. All fees, costs and expenses incurred in connection with the services provided by the applicable investment bank or the applicable accountant under this Section 20 shall be borne by the party whose position did not prevail in the investment bank’s or accountant’s final determination.

21.          NOTICES; PAYMENTS.

(a)          Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Note must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

Workstream Inc.

485 N. Keller Road, Suite 50

Maitland, Florida 32751

Telephone:(407)475-5500

Facsimile:(407)475-5517

Attention:  CEO

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With a copy (for informational purposes only) to:

Cozen O’Connor

1900 Market Street

Philadelphia, Pennsylvania 19103

Telephone:  (215) 665-4141

Facsimile:  (215) 665-2013

Attention:  Michael J. Heller, Esquire

If to the Holder:

CCM Master Qualified Fund, Ltd.

c/o Coghill Capital Management, L.L.C.

One North Wacker Drive, Suite 4350

Chicago, IL 60606Telephone: (312) 324-2017

Facsimile: (312) 324-2001

Attention: Gunnar Olsen

With a copy (for informational purposes only) to:

Seward & Kissel LLP

One Battery Park Plaza

New York, NY

Telephone:  (212) 574-1200

Facsimile:  (212)-480-8421

Attention:  Craig A. Sklar, Esq

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.  The Company shall provide the Holder with prompt written notice of a ll actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

(b)          Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly provided herein such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent to such Person at such address as previously provided to the Company

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in writing (which address, in the case of the Holder, shall initially be as set forth in Section 21(a), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under this Note which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).

22.          CANCELLATION.  After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

23.          WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the other Transaction Documents.

24.          GOVERNING LAW. Pursuant to 735 Illinois Compiled Statutes 105/5-5, all questions concerning the construction, validity, enforcement, performance and interpretation of this Note shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Chicago, Illinois, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemp lated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other le gal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

25.          CERTAIN DEFINITIONS.  For purposes of this Note, the following terms shall have the following meanings:

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(a)           “Approved Share Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to or subsequent to the date hereof pursuant to which Common Shares, restricted stock units and standard options to purchase Common Shares may be issued to any employee, officer or director for services provided to the Company in their capacity as such.

(b)           “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized or required by law to remain closed.

(c)           “Cash Balance” means, at any date, an amount equal to the aggregate amount of cash and cash equivalents (but not including any restricted cash), as shown or reflected in the Company’s consolidated balance sheet as at such date.

(d)           “Closing Date” shall be the Issuance Date.

(e)           “Common Shares” means (i) the Company’s common shares, no par value per share, and (ii) any capital shares into which such common shares shall have been changed or any share capital resulting from a reclassification of such common shares.

(f)           “Contingent Obligation” means, as to any Person, any direct or indirect liability or guaranty, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide a guaranty or assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

(g)           “Current Subsidiaries” means, collectively, Workstream USA, Inc., a Delaware corporation, Paula Allen Holdings, Inc., a Florida corporation, The Omni Partners, Inc., a Florida corporation, 6FigureJobs.com, Inc., a Delaware corporation, and Workstream Merger Sub Inc., a Delaware corporation, and each of the foregoing, individually, a “Current Subsidiary.”

(h)           “Disposition” means the sale, lease, license, assignment, transfer, conveyance or other disposition of any assets or rights of the Company or any of its Subsidiaries, whether now owned or hereafter acquired, other than a Permitted Sale.

(i)           “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the Pink Sheets.

(j)           “Exchange Agreement” means that certain 2010 Exchange and Share Purchase Agreement, dated as of the Issuance Date, between the Holder and the Company.

(k)           “Fiscal Quarter” means each of the fiscal quarters adopted by the Company for financial reporting purposes that correspond to the Company’s fiscal year that ends on May 31, or such other fiscal quarter adopted by the Company for financial reporting purposes in accordance with GAAP.

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(l)           “Fundamental Transaction” means that (i) the Company shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any material Subsidiary to another Person, or (3) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding Common Shares (not including any Common Shares held by the Person or Persons making or party to, or associated or affiliated with the Persons m aking or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding Common Shares (not including any Common Shares held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify its Common Shares, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Shares.

(m)          “GAAP” means United States generally accepted accounting principles, consistently applied.

(n)           “Guaranty” mean that certain Guaranty of each Subsidiary issued as of the Issuance Date in favor of the Holder.

(o)           “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns s uch assets or property has not assumed or become liable for the payment of such

17

indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.

(p)           “Interest Rate” means 12% per annum.

(q)           “Liquidity Event” means any event giving rise to Proceeds (including, without limitation, by virtue of any equity issuance (except for issuances of Common Shares, restricted stock units and standard options to purchase Common Shares pursuant to an Approved Share Plan), incurrence of Indebtedness, refinancing of any Indebtedness, Fundamental Transaction or otherwise), other than (i) a Disposition, (ii) the direct or indirect receipt by the Company or any of its Subsidiaries of accounts receivable in the ordinary course of business or (iii) the incurrence of the Indebtedness specified in, and permitted by, clause (i) of Permitted Indebtedness.

(r)           “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the Transaction Documents or (iii) the authority or ability of the Company or any of the Subsidiaries to perform their respective obligations contemplated hereby or under any of the Transaction Documents.

(s)           “Maturity Date” shall mean October 13, 2012; provided, however, the Maturity Date may be extended at the option of the Holder (i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction is publicly announced or a Fundamental Transaction Notice is delivered prior to the Maturity Date.

(t)           “Net Proceeds” means all Proceeds in respect of the applicable Disposition (including, without limitation, all installment obligations and earn-out and other contingent payments) or Liquidity Event (as the case may be) net of (i) in the case of a Disposition, any income taxes required to be paid by the Company or any Subsidiary (as the case may be) solely in connection with or solely arising out of such Disposition and (ii) all reasonable legal, accounting, investment banking, broker and other professionals’ fees incurred by the Company by virtue of the applicable Disposition or Liquidity Event (as the case may be), provided that the foregoing Proceeds shall not be reduced by any other amount. Any dispute as to the arithmetic calculation of Net Proceeds shall be resolved pursuant to Section 20 above, with the term “Net Proceeds” being substituted for the term “fair market value.”

(u)           “New Subsidiaries” means, as of any date of determination, any Person (i) in which the Company on or after the Issuance Date, directly or indirectly, owns or acquires any of the outstanding capital stock or holds any equity or similar interest of such Person or (ii) in which the Company on or after the date of the Issuance Date, directly or indirectly, controls or operates all or any part of the business, operations or administration of such Person, and each of the foregoing, individually, a “New Subsidiary.”

(v)           “Parent Entity” of a Person means an entity that, directly or indirectly, controls

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the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(w)          “Permitted Indebtedness” means (i) total Indebtedness (other than Indebtedness described in subsections (ii) and (iii) hereunder) of the Company and the Subsidiaries not to exceed $500,000 in the aggregate outstanding at any time; provided, however, such Indebtedness shall be made expressly subordinate in right of payment to the Indebtedness evidenced by the Notes, as reflected in a written agreement acceptable to the Holder and approved by the Holder in writing, and which Indebtedness does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later; (ii) equipment leases and purchase money obligations of the Company and the Subsidiaries not to exceed $500,000 in the aggregate outstanding at any time; and (iii) Indebtedness evidenced by this Note.

(x)          “Permitted Liens” means (i) any Lien for taxes, assessments and governmental charges not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings and (iv) Liens sec uring Permitted Senior Indebtedness.

(y)           “Permitted Senior Indebtedness” means the Indebtedness specified in, and permitted by, clauses (ii) and (iii) of the definition of “Permitted Indebtedness.”

(z)           “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(aa)         “Principal Market” means the OTC Bulletin Board.

(bb)         “Proceeds” means all consideration (including, without limitation, cash, cash equivalents and publicly-traded securities) received or to be received directly or indirectly by the Company and/or any of its Subsidiaries. Any dispute as to the arithmetic calculation of Proceeds shall be resolved pursuant to Section 20 above, with the term “Proceeds” being substituted for the term “fair market value.”

(cc)         “Redemption Notices” means, collectively, the Event of Default Redemption Notice, the Test Default Redemption Notice and each Mandatory Redemption Notice, and each of the foregoing, individually, a “Redemption Notice.”

(dd)         “Redemption Prices” means, collectively, the Event of Default Redemption Price, the Test Default Redemption Price and each applicable Mandatory Redemption Price, and each of the foregoing, individually, a “Redemption Price.”

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(ee)         “Security Agreement” means that certain security agreement, dated as of the Issuance Date, by and among the Company, the Subsidiaries and the Holder.

(ff)          “Security Documents” means the Security Agreement, the Copyright Security Agreement, Patent Security Agreement and Trademark Security Agreement (each as defined in the Security Agreement) and the Guaranty.

(gg)         “Subsidiaries” means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing, individually, a “Subsidiary.”

(hh)         “Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(ii)           “Trading Day” means any day on which the Common Shares are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Shares, then on the principal securities exchange or securities market on which the Common Shares are then traded, provided that “Trading Day” shall not include any day on which the Common Shares are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Shares are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the ho ur ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

(jj)           “Transaction Documents” means Exchange Agreement, this Note and each of the Security Documents.

[signature page follows]

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

COMPANY:

WORKSTREAM INC.

By: 

      Name: _________________

        Title:  __________________

EX-10.4

Exhibit 10.4

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”), dated as of August 13, 2010, is made by and among the Grantors listed on the signature pages hereof (collectively, jointly and severally, the “Grantors” and each, individually, a “Grantor”), and CCM Master Qualified Fund, Ltd. (the “Secured Party”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Senior Secured Note, dated as of August 13, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “Note”), executed by WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Parent”), in favor of the Secured Party, Parent has agreed to issue the Note to the Secured Party according to the terms and conditions set forth in the Note;

WHEREAS, each Grantor other than Parent is a direct or indirect wholly-owned subsidiary of Parent and will receive direct and substantial benefits from the issuance of the Note; and

WHEREAS, in order to induce the Secured Party to make the loan under the Note, Grantors have agreed to grant a continuing security interest in and to the Collateral in order to secure the prompt and complete payment, observance and performance of the Secured Obligations.

NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1.Defined Terms. All capitalized terms used herein (including in the preamble and recitals hereof) without definition shall have the meanings ascribed thereto in the Note.  Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Note; provided, however, that if the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern. In addition to those terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the following meanings:

(a)“Account” means an account (as that term is defined in the Code).

(b)“Account Debtor” means an account debtor (as that term is defined in the Code).

(c)“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

(d)“Books” means books and records (including each Grantor’s Records indicating, summarizing, or evidencing each Grantor’s assets (including the Collateral) or liabilities, each Grantor’s Records relating to its business operations or financial condition, and each Grantor’s goods or General Intangibles related to such information).

(e)“Chattel Paper” means chattel paper (as that term is defined in the Code) and includes tangible chattel paper and electronic chattel paper.

(f)“Code” means the Illinois Uniform Commercial Code, as in effect from time to time; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, priority, or remedies with respect to the Secured Party’s Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Illinois, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies.

(g)“Collateral” has the meaning specified therefor in Section 2.

(h)“Commercial Tort Claims” means commercial tort claims (as that term is defined in the Code), and includes those commercial tort claims listed on Schedule 1 attached hereto.

(i)“Control Agreement” means a control agreement, in form and substance satisfactory to the Secured Party, executed and delivered by a Grantor, the Secured Party, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).

(j)“Copyrights” means copyrights and copyright registrations, and also includes (i) the copyright registrations and recordings thereof and all applications in connection therewith listed on Schedule 2 attached hereto and made a part hereof, (ii) all reissues, continuations, extensions or renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (i v) the right to sue for past, present and future infringements and dilutions thereof, (v) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (vi) all of each Grantor’s rights corresponding thereto throughout the world.

(k)“Copyright Security Agreement” means each Copyright Security Agreement among Grantors, or any of them, and the Secured Party, in substantially the form of Exhibit A attached hereto, pursuant to which Grantors have granted to the Secured Party a security interest in all their respective Copyrights.

(l)“Deposit Account” means a deposit account (as that term is defined in the Code).

(m)“Equipment” means equipment (as that term is defined in the Code).

(n)“Event of Default” has the meaning specified therefor in the Note.

(o)“Exchange Agreement” means that certain 2010 Exchange and Share Purchase Agreement, dated as of the date hereof, between Parent and the Secured Party.

(p)“General Intangibles” means general intangibles (as that term is defined in the Code) and, in any event, includes payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill (including the goodwill associated with any Trademark, Patent, or Copyright), Patents, Trademarks, Copyrights, URLs and domain names, industrial designs, other industrial or Intellectual Property or rights therein or applications therefor, whether under license or otherwise, programs, programming materials, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Intellectual Property Licenses, infringement claims, computer programs, information contained on computer disks or tapes,

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software, literature, reports, catalogs, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and oil, gas, or other minerals before extraction.

(q)“Governmental Authority” means any domestic or foreign federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

(r)“Grantor” and “Grantors” have the meanings specified therefor in the recitals to this Agreement.

(s)“Guaranties” means each Guaranty dated of even date herewith executed by Guarantors in favor of the Secured Party, together with any other guaranty or similar agreement now or hereafter executed by a Guarantor in favor of the Secured Party in connection with the Note or any of the other Transaction Documents.

(t)“Guarantor” means each Grantor, other than Parent, and each other Person that now or hereafter executes a Guaranty.

(u)“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law or any equivalent laws in any other jurisdiction, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

(v)“Intellectual Property” means Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks, trade secrets and customer lists, and Intellectual Property Licenses.

(w)“Intellectual Property Licenses” means rights under or interests in any patent, trademark, copyright or other intellectual property, including software license agreements with any other party, whether the applicable Grantor is a licensee or licensor under any such license agreement, including the license agreements listed on Schedule 3 attached hereto and made a part hereof.

(x)“Inventory” means inventory (as that term is defined in the Code).

(y)“Investment Related Property” means (i) investment property (as that term is defined in the Code), and (ii) all of the following (regardless of whether classified as investment property under the Code): all Pledged Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.

(z)“Lien” has the meaning specified therefor in the Note.

(aa)“Negotiable Collateral” means letters of credit, letter-of-credit rights, instruments, promissory notes, drafts, and documents.

(bb)“New Subsidiary” has the meaning specified therefor in the Note.

(cc)“Note” has the meaning specified therefor in the recitals to this Agreement.

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(dd)“Parent” has the meaning specified therefor in the recitals to this Agreement.

(ee)“Patents” means patents and patent applications, and also includes (i) the patents and patent applications listed on Schedule 4 attached hereto and made a part hereof, (ii) all renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or dilutions thereof, (iv) the right to sue for past, present and future infringements and dilutions thereof, and (v) all of each Gr antor’s rights corresponding thereto throughout the world.

(ff)“Patent Security Agreement” means each Patent Security Agreement among Grantors and the Secured Party in substantially the form of Exhibit B attached hereto, pursuant to which Grantors have granted to the Secured Party a security interest in all their respective Patents.

(gg)“Permitted Liens” has the meaning specified therefor in the Note.

(hh)“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(ii)“Pledged Companies” means, each Person listed on Schedule 5 hereto as a “Pledged Company”, together with each other Person all or a portion of whose Stock is acquired or otherwise owned by a Grantor after the date hereof.

(jj)“Pledged Interests” means all of each Grantor’s right, title and interest in and to all of the Stock now or hereafter owned by such Grantor, regardless of class or designation, including all substitutions therefor and replacements thereof, all proceeds thereof and all rights relating thereto, also including any certificates representing the Stock, the right to receive any certificates representing any of the Stock, all warrants, options, share appreciation rights and other rights, contractual or otherwise, in respect thereof, and the right to receive dividends, distributions of income, profits, surplus, or other compensation b y way of income or liquidating distributions, in cash or in kind, and cash, instruments, and other property from time to time received, receivable, or otherwise distributed in respect of or in addition to, in substitution of, on account of, or in exchange for any or all of the foregoing.

(kk)“Pledged Operating Agreements” means all of each Grantor’s rights, powers, and remedies under the limited liability company operating agreements of each of the Pledged Companies that are limited liability companies.

(ll)“Pledged Partnership Agreements” means all of each Grantor’s rights, powers, and remedies under the partnership agreements of each of the Pledged Companies that are partnerships.

(mm)“PPSA” means the Personal Property Security Act (Ontario), as in effect from time to time.

(nn)“Proceeds” has the meaning specified therefor in Section 2.

(oo)“Real Property” means any estates or interests in real property now owned or hereafter acquired by any Grantor and the improvements thereto.

(pp)“Records” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

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(qq)“Secured Obligations” mean all of the present and future payment and performance obligations of Grantors arising under this Agreement, the Note, the Guaranties, and the other Transaction Documents, including, without duplication, reasonable attorneys’ fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Insolvency Proceeding.

(rr)“Securities Account” means a securities account (as that term is defined in the Code).

(ss)“Security Documents” means, collectively, this Agreement, each Copyright Security Agreement, each Patent Security Agreement, each Trademark Security Agreement, each Control Agreement, and each other security agreement, pledge agreement, assignment, mortgage, security deed, deed of trust, and other agreement or document executed and delivered by a Grantor as security for any of the Secured Obligations.

(tt)“Security Interest” has the meaning specified therefor in Section 2.

(uu)“Stock” means all shares, options, warrants, interests (including membership and partnership interests), participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the United States Securities and Exchange Commission and any successor thereto under the Securities Exchange Act of 1934, as in effect from time to time).

(vv)“Supporting Obligations” means supporting obligations (as such term is defined in the Code).

(ww)“Trademarks” means trademarks, trade names, trademark applications, service marks, service mark applications, and also includes (i) the trade names, trademarks, trademark applications, service marks, and service mark applications listed on Schedule 6 attached hereto and made a part hereof, and (ii) all renewals thereof, (iii) all income, royalties, damages and payments now and hereafter due or payable under and with respect thereto, including payments under all licenses entered into in connection therewith and damages and payments for past or future infringements or di lutions thereof, (iv) the right to sue for past, present and future infringements and dilutions thereof, (v) the goodwill of each Grantor’s business symbolized by the foregoing or connected therewith, and (vi) all of each Grantor’s rights corresponding thereto throughout the world.

(xx)“Trademark Security Agreement” means each Trademark Security Agreement among Grantors and the Secured Party in substantially the form of Exhibit C attached hereto, pursuant to which Grantors have granted to the Secured Party a security interest in all their respective Trademarks.

(yy)“Transaction Documents” means this Agreement, the Note, the Security Documents, the Guaranties and the Exchange Agreement.

(zz)“URL” means “uniform resource locator,” an internet web address.

2.Grant of Security.  Each Grantor hereby unconditionally grants, assigns, and pledges to the Secured Party, a continuing security interest (a “Security Interest”) in all assets of such Grantor (other than real property) whether now owned or hereafter acquired or arising and wherever located, including, without limitation, such Grantor’s right, title, and interest in and to the following, whether now owned or hereafter acquired or arising and wherever located (collectively, the “Collateral”):

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(a)all of such Grantor’s Accounts;

(b)all of such Grantor’s Books;

(c)all of such Grantor’s Chattel Paper;

(d)all of such Grantor’s Deposit Accounts;

(e)all of such Grantor’s Equipment and fixtures;

(f)all of such Grantor’s General Intangibles;

(g)all of such Grantor’s Inventory;

(h)all of such Grantor’s Investment Related Property;

(i)all of such Grantor’s Negotiable Collateral;

(j)all of such Grantor’s rights in respect of Supporting Obligations;

(k)all of such Grantor’s Commercial Tort Claims;

(l)all of such Grantor’s money, cash, cash equivalents, or other assets of each such Grantor that now or hereafter come into the possession, custody, or control of the Secured Party;

(m)all of the proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance or Commercial Tort Claims covering or relating to any or all of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory, Investment Related Property, Negotiable Collateral, Supporting Obligations, money, or other tangible or intangible property resulting from the sale, lease, license, exchange, collection, or other disposition of any of the foregoing, the proceeds of any award in condemnation with respect to any of the foregoing, any rebates or refunds, whether for taxes or otherwise, and all proceeds of any such proceeds, or any portion thereof or interest therein, and the proceeds thereof, and all proceeds of any loss of, damage to, or destruction of the above, whether insured or not insured, and, to the extent not otherwise included, any indemnity, warranty, or guaranty payable by reason of loss or damage to, or otherwise with respect to any of the foregoing (the “Proceeds”).  Without limiting the generality of the foregoing, the term "Proceeds" includes whatever is receivable or received when Investment Related Property or proceeds are sold, exchanged, collected, or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes proceeds of any indemnity or guaranty payable to any Grantor or the Secured Party from time to time with respect to any of the Investment Related Property.

3.Security for Obligations.  This Agreement and the Security Interest created hereby secure the payment and performance of the Secured Obligations, whether now existing or arising hereafter.  Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to the Secured Party but for the fact that they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

4.Grantors Remain Liable.  Anything herein to the contrary notwithstanding, (a) each of the Grantors shall remain liable under the contracts and agreements included in the Collateral, including the Pledged Operating Agreements and the Pledged Partnership Agreements, to perform all of the duties and

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obligations thereunder to the same extent as if this Agreement had not been executed, (b) the exercise by the Secured Party of any of the rights hereunder shall not release any Grantor from any of its duties or obligations under such contracts and agreements included in the Collateral, and (c) the Secured Party shall not have any obligation or liability under such contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.  Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement or any other Transaction Document, Grantors shall have the ri ght to possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of their respective businesses, subject to and upon the terms hereof and the other Transaction Documents.  Without limiting the generality of the foregoing, it is the intention of the parties hereto that record and beneficial ownership of the Pledged Interests, including all voting, consensual, and dividend rights, shall remain in the applicable Grantor until the occurrence of an Event of Default and until the Secured Party shall notify the applicable Grantor of the Secured Party’s exercise of voting, consensual, or dividend rights with respect to the Pledged Interests pursuant to Section 15 hereof.

5.Representations and Warranties.  Each Grantor hereby represents and warrants as follows:

(a)The exact legal name of each of the Grantors is set forth on the signature pages of this Agreement.

(b)Schedule 7 attached hereto sets forth (i) all Real Property owned or leased by Grantors, together with all other location of Collateral, as of the date hereof, and (ii) the chief executive office of each Grantor as of the date hereof.

(c)As of the date hereof, no Grantor has any interest in, or title to, any Copyrights, Intellectual Property Licenses, Patents, or Trademarks except as set forth on Schedules 2, 3, 4 and 6, respectively, attached hereto.  This Agreement is effective to create a valid and continuing Lien on such Copyrights, Intellectual Property Licenses, Patents and Trademarks and, upon filing of the Copyright Security Agreement with the United States Copyright Office and filing of the Patent Security Agreement and the Trademark Security Agreement with the United States Patent and Trademark Office, and the filing of appropriate financing statements in the jurisdictions listed on Schedule 8 hereto, all action necessary or desirable to protect and perfect the Security Interest in and to each Grantor’s Patents, Trademarks, or Copyrights has been taken and such perfected Security Interest is enforceable as such as against any and all creditors of and purchasers from any Grantor.  No Grantor has any interest in any Copyright that is material to the operation of such Grantor’s business, except for those Copyrights identified on Schedule 2 attached hereto which have been registered with the United States Copyright Office.

(d)This Agreement creates a valid security interest in all of the Collateral of each Grantor, to the extent a security interest therein can be created under the Code or the PPSA, as applicable, securing the payment of the Secured Obligations.  Except to the extent a security interest in the Collateral cannot be perfected by the filing of a financing statement under the Code or the PPSA, all filings and other actions necessary or desirable to perfect and protect such security interest have been duly taken or will have been taken upon the filing of financing statements listing each applicable Grantor, as a debtor, and the Secured Party, as a secured party, in the jurisdictions listed next to such Grantor ’s name on Schedule 8 attached hereto.  Upon the making of such filings, the Secured Party shall have a first priority perfected security interest in all of the Collateral of each Grantor to the extent such security interest can be perfected by the filing of a financing statement.  All action by any Grantor necessary to protect and perfect such security interest on each item of Collateral has been duly taken.

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(e)(i) Except for the Security Interest created hereby or as otherwise provided herein, such Grantor is and will at all times be the sole holder of record and the legal and beneficial owner, free and clear of all Liens other than Permitted Liens, of the Pledged Interests indicated on Schedule 5 as being owned by such Grantor and, when acquired by such Grantor, any Pledged Interests acquired after the date hereof; (ii) all of the Pledged Interests are duly authorized, validly issued, fully paid and nonassessable and the Pledged Interests constitute or will constitute the percentage of the issued and outstanding Stock of the Pledged Companies of such Grantor identified on Schedule 5 hereto; (iii) such Grantor has the right and requisite authority to pledge all Investment Related Property pledged by such Grantor to each Secured Party as provided herein; (iv) all actions necessary or desirable to perfect, establish the first priority of, or otherwise protect, the Secured Party’s Liens in the Investment Related Property pledged hereunder, and the proceeds thereof, have been duly taken, (A) upon the execution and delivery of this Agreement; (B) upon the taking of possession by the Secured Party of any certificates constituting the Pledged Interests, to the extent such Pledged Interests are represented by certificates, together with undated powers endorsed in blank by the applicable Grantor; (C) upon the filing of financing statements in the applicable jurisdiction set forth on Schedule 8 attached hereto for such Grantor wit h respect to the Pledged Interests of such Grantor that are not represented by certificates, and (D) with respect to any Securities Accounts, upon the delivery of Control Agreements with respect thereto; and (v) each Grantor has delivered to and deposited with the Secured Party (or, with respect to any Pledged Interests created or obtained after the date hereof, will deliver and deposit in accordance with Sections 6(a) and 8 hereof) all certificates representing the Pledged Interests owned by such Grantor to the extent such Pledged Interests are represented by certificates, and undated powers endorsed in blank with respect to such certificates. None of the Pledged Interests owned or held by such Grantor has been issued or transferred in violation of any securities registration, securities disclosure, or similar laws of any jurisdiction to which such issuance or transfer may be sub ject.

(f)No consent, approval, authorization, or other order or other action by, and no notice to or filing with, any Governmental Authority or any other Person is required (i) for the grant of a Security Interest by such Grantor in and to the Collateral pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Grantor, or (ii) for the exercise by the Secured Party of the voting or other rights provided in this Agreement with respect to Investment Related Property pledged hereunder or the remedies in respect of the Collateral pursuant to this Agreement, except (A) as may be required in connection with such disposition of Investment Related Property by laws affecting the offeri ng and sale of securities generally and (B) for any consent that may be required for the assignment of any Intellectual Property License that expressly provides that such Intellectual Property License is not assignable (or is not assignable without the consent of the other party to such Intellectual Property License).

6.Covenants.  Each Grantor, jointly and severally, covenants and agrees with the Secured Party that from and after the date of this Agreement and until the date of termination of this Agreement in accordance with Section 24 hereof (but only to the extent the particular assets described in this Section 6 constitute Collateral hereunder):

(a)Possession of Collateral.  In the event that any Collateral, including proceeds, is evidenced by or consists of Negotiable Collateral, Investment Related Property, or Chattel Paper, and if and to the extent that perfection or priority of the Secured Party’s Security Interest is dependent on or enhanced by possession, the applicable Grantor, immediately upon the request of the Secured Party, shall execute such other documents and instruments as shall be reasonably requested by the Secured Party or, if applicable, endorse and deliver physical possession of such Negotiable Collateral, Investment Related Property, or Chattel Paper to the Secured Party, together with such undated powers endorsed in blank as shall be reasonably requested by the Secured Party.

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(b)Chattel Paper.

(i)Each Grantor shall take all steps reasonably necessary to grant the Secured Party control of all Chattel Paper in accordance with the Code and the PPSA and all “transferable records” as that term is defined in Section 16 of the Uniform Electronic Purchase Act and Section 201 of the federal Electronic Signatures in Global and National Commerce Act as in effect in any relevant jurisdiction; and

(ii)If any Grantor retains possession of any Chattel Paper or instruments (which retention of possession shall be subject to the extent permitted hereby), promptly upon the request of the Secured Party, such Chattel Paper and instruments shall be marked with the following legend: “This writing and the obligations evidenced or secured hereby are subject to the Security Interest of [name of the Secured Party]”.

(c)Control Agreements.

(i)Each Grantor shall obtain an authenticated Control Agreement from each bank maintaining a Deposit Account for such Grantor; and

(ii)Upon request of the Secured Party, each Grantor shall obtain authenticated Control Agreements from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities to or for such Grantor.

(d)Letter-of-Credit Rights.  Each Grantor that is or becomes the beneficiary of a letter of credit, such Grantor shall promptly (and in any event within 2 Business Days after becoming a beneficiary) notify the Secured Party thereof and, upon the request by the Secured Party, as soon as reasonably practicable enter into a multi-party agreement with the Secured Party and the issuing or confirming bank with respect to letter-of-credit rights assigning such letter-of-credit rights to the Secured Party and directing all payments thereunder to the Secured Party, all in form and substance reasonably satisfactory to the Secured Party.

(e)Commercial Tort Claims.  Each Grantor shall promptly (and in any event within 2 Business Days of receipt thereof) notify the Secured Party in writing upon incurring or otherwise obtaining a Commercial Tort Claim with a potential value in excess of $100,000 after the date hereof and, upon request of the Secured Party, promptly amend Schedule 1 to this Agreement to describe such after-acquired Commercial Tort Claim in a manner that reasonably identifies such Commercial Tort Claim, and hereby authorizes the filing of additional financing statements or amendments to existing financing statements describing such Commercial Tort Claims, and agrees to do such other acts or things deemed necessary or desirable by the Secured Party to give the Secured Party a first priority, perfected security interest in any such Commercial Tort Claim.

(f)Government Contracts.  If any Account or Chattel Paper arises out of a contract or contracts with the United States of America, the federal or any provincial government of Canada, or any department, agency, or instrumentality of either such government, Grantors shall promptly (and in any event within 2 Business Days of the creation thereof) notify the Secured Party thereof in writing and execute any instruments or take any steps reasonably required by the Secured Party under the Assignment of Claims Act or other applicable law to provide the Secured Party a first-priority perfected Security Interest in such contract.

(g)Intellectual Property.

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(i)Upon request of the Secured Party, in order to facilitate filings with the United States Patent and Trademark Office and the United States Copyright Office or any other applicable Governmental Authority, each Grantor shall execute and deliver to the Secured Party one or more Copyright Security Agreements, Trademark Security Agreements, or Patent Security Agreements to further evidence the Secured Party’s respective Liens on such Grantor’s Copyrights, Trademarks or Patents;

(ii)Each Grantor shall have the duty to take all reasonable and necessary action to preserve and maintain all of each Grantor’s Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights therein, including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings.  In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, Guarantor shall (A) take such actions as Guarantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (B) promptly notify the Secured Party after it learns thereo f and sue for infringement, misappropriation or dilution, to seek injunctive relief where appropriate and to recover any and all damages for such infringement, misappropriation or dilution.  Any expenses incurred in connection with the foregoing shall be borne by Grantors.  Each Grantor further agrees not to abandon any Trademark, Patent, Copyright, or Intellectual Property License;

(iii)Grantors acknowledge and agree that the Secured Party shall have no duties with respect to the Trademarks, Patents, Copyrights, or Intellectual Property Licenses.  Without limiting the generality of this Section 6(g), Grantors acknowledge and agree that the Secured Party shall not be under any obligation to take any steps necessary to preserve rights in the Trademarks, Patents, Copyrights, or Intellectual Property Licenses against any other Person, but the Secured Party may do so at its option from and after the occurrence and during the continuance of an Event of Default, and all expenses incurred in connection therewith (including reasonable fees and expenses of attorneys and other professionals) shall be for the sole account of the Grantors and shall be deemed to be Secured Obligations.

(h)Investment Related Property.

(i)If any Grantor shall receive or become entitled to receive any Pledged Interests after the date hereof, it shall promptly (and in any event within 2 Business Days of receipt thereof) identify such Pledged Interests in a written notice to the Secured Party;

(ii)Each Grantor shall promptly deliver to the Secured Party a copy of each notice or other communication received by it in respect of any Pledged Interests;

(iii)No Grantor shall make or consent to any material amendment or other modification or waiver with respect to any Pledged Interests, Pledged Operating Agreement, or Pledged Partnership Agreement, or enter into any agreement or permit to exist any restriction with respect to any Pledged Interests other than as permitted herein;

(iv)Each Grantor agrees that it will cooperate with the Secured Party in obtaining all necessary approvals and making all necessary filings under federal, state, local, or foreign law in connection with the Security Interest on the Investment Related Property pledged hereunder or any sale or transfer thereof; and

(v)As to all limited liability company or partnership interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor hereby represents, warrants and covenants that the Pledged Interests issued pursuant to such agreement (A) are not and shall

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not be dealt in or traded on securities exchanges or in securities markets, (B) do not and will not constitute investment company securities, and (C) are not and will not be held by such Grantor in a securities account.  In addition, none of the Pledged Operating Agreements, the Pledged Partnership Agreements, or any other agreements governing any of the Pledged Interests issued under any Pledged Operating Agreement or Pledged Partnership Agreement, provide or shall provide that such Pledged Interests are securities governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction.

(i)Transfers and Other Liens.  Grantors shall not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, except as expressly permitted by this Agreement and the other Transaction Documents, or (ii) create or permit to exist any Lien upon or with respect to any of the Collateral of any of Grantors, except for Permitted Liens.  The inclusion of Proceeds in the Collateral shall not be deemed to constitute consent by the Secured Party to any sale or other disposition of any of the Collateral except as expressly permitted in this Agreement or the other Transaction Documents. Notwithstanding anything contained in this Agreement to the contrary, Permitted Liens shall not be permitted with respect to any Pledged Interests.

(j)Other Actions as to Any and All Collateral.  Each Grantor shall promptly (and in any event within 2 Business Days of acquiring or obtaining such Collateral) notify the Secured Party in writing upon (i) acquiring or otherwise obtaining any Collateral after the date hereof consisting of Trademarks, Patents, registered Copyrights, Intellectual Property Licenses, Investment Related Property, Chattel Paper (electronic, tangible or otherwise), documents (as defined in Article 9 of the Code), promissory notes (as defined in the Code, or instruments (as defined in the Code) or (ii) any amount payable under or in connection with any of the Coll ateral being or becoming evidenced after the date hereof by any Chattel Paper, documents, promissory notes, or instruments and, in each such case upon the request of the Secured Party, promptly execute such other documents, or if applicable, deliver such Chattel Paper, other documents or certificates evidencing any Investment Related Property and do such other acts or things deemed reasonably necessary or desirable by the Secured Party to protect the Secured Party’s Security Interest therein.

7.Relation to Other Transaction Documents.  The provisions of this Agreement shall be read and construed with the Transaction Documents referred to below in the manner so indicated.

(a)Note. In the event of any conflict between any provision in this Agreement and a provision in the Note, such provision of the Note shall control, except to the extent the applicable provision in this Agreement is more restrictive with respect to the rights of Grantors or imposes more burdensome or additional obligations on Grantors, in which event the applicable provision in this Agreement shall control.

(b)Patent, Trademark, Copyright Security Agreements.  The provisions of the Copyright Security Agreements, Trademark Security Agreements, and Patent Security Agreements are supplemental to the provisions of this Agreement, and nothing contained in the Copyright Security Agreements, Trademark Security Agreements or the Patent Security Agreements shall limit any of the rights or remedies of the Secured Party hereunder.

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8.Further Assurances.

(a)Each Grantor agrees that from time to time, at its own expense, such Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Secured Party may reasonably request, in order to perfect and protect the Security Interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any of the Collateral.

(b)Each Grantor authorizes the filing by the Secured Party of financing or continuation statements, or amendments thereto, and such Grantor will execute and deliver to the Secured Party such other instruments or notices, as may be necessary or as the Secured Party may reasonably request, in order to perfect and preserve the Security Interest granted or purported to be granted hereby.

(c)Each Grantor authorizes the Secured Party at any time and from time to time to file, transmit, or communicate, as applicable, financing statements and amendments (i) describing the Collateral as “all personal property of debtor” or “all assets of debtor” or words of similar effect, (ii) describing the Collateral as being of equal or lesser scope or with greater detail, or (iii) that contain any information required by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance.

(d)Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection with this Agreement without the prior written consent of the Secured Party affected thereby, subject to such Grantor’s rights under Section 9-509(d)(2) of the Code.

(e)           Parent agrees that, within 60 days after the date hereof, Parent shall take all actions as may be necessary or appropriate in order to extend its business registration in British Columbia, Canada and provide the Secured Party with satisfactory written evidence of such extension.

9.Secured Party’s Right to Perform Contracts, Exercise Rights, etc.  Upon the occurrence and during the continuance of an Event of Default, the Secured Party (a) may proceed to perform any and all of the obligations of any Grantor contained in any contract, lease, or other agreement and exercise any and all rights of any Grantor therein contained as fully as such Grantor itself could, (b) shall have the right to use any Grantor’s rights under Intellectual Property Licenses in connection with the enforcement of the Secured Party’s rights hereunder, including the right to prepare for sale and sell any and all Inventory and Equipment now or hereafter owned by any Grantor and now or hereafter covered by such licenses, and (c) shall have the right to request that any Stock that is pledged hereunder be registered in the name of the Secured Party or any of its nominees.

10.Secured Party Appointed Attorney-in-Fact.  Each Grantor, on behalf of itself and each New Subsidiary of such Grantor, hereby irrevocably appoints the Secured Party as the attorney-in-fact of such Grantor and each such New Subsidiary for the sole purpose of carrying out the terms of, and to accomplish the purposes of, this Agreement.  In the event any Grantor or New Subsidiary fails to execute or deliver in a timely manner any Transaction Document which such Grantor or New Subsidiary now or at any time hereafter is required to execute or deliver pursuant to the terms of any Transaction Document, the Secured Party shall have fu ll authority in the place and stead of such Grantor or New Subsidiary, and in the name of such Grantor, such New Subsidiary or otherwise, to execute and deliver each such Transaction Document.  Without limitation of the foregoing, the Secured Party shall have full authority in the place and stead of each Grantor and each New Subsidiary, and in the name of any such Grantor, any such New Subsidiary or otherwise, at such time as an Event of Default has occurred and is continuing, to take any action and to execute any instrument which the Secured Party may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including:

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(a)to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with any Collateral of such Grantor or New Subsidiary;

(b)to receive and open all mail addressed to such Grantor or New Subsidiary and to notify postal authorities to change the address for the delivery of mail to such Grantor or New Subsidiary to that of the Secured Party;

(c)to receive, indorse, and collect any drafts or other instruments, documents, Negotiable Collateral or Chattel Paper;

(d)to file any claims or take any action or institute any proceedings which the Secured Party may deem reasonably necessary or desirable for the collection of any of the Collateral of such Grantor or New Subsidiary or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral;

(e)to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any Person obligated to such Grantor or New Subsidiary in respect of any Account of such Grantor or New Subsidiary;

(f)to use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial designs, Copyrights, advertising matter or other industrial or intellectual property rights, in advertising for sale and selling Inventory and other Collateral and to collect any amounts due under Accounts, contracts or Negotiable Collateral of such Grantor or New Subsidiary; and

(g)the Secured Party shall have the right, but shall not be obligated, to bring suit in its own name to enforce the Trademarks, Patents, Copyrights and Intellectual Property Licenses and, if the Secured Party shall commence any such suit, the appropriate Grantor or New Subsidiary shall, at the request of the Secured Party, do any and all lawful acts and execute any and all proper documents reasonably required by the Secured Party in aid of such enforcement.

To the extent permitted by law, each Grantor hereby ratifies, for itself and each of its New Subsidiaries, all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated.

11.Secured Party May Perform.  If any Grantor fails to perform any agreement contained herein, the Secured Party may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Secured Party incurred in connection therewith shall be payable, jointly and severally, by Grantors.

12.Secured Party’s Duties; Bailee for Perfection.  The powers conferred on the Secured Party hereunder are solely to protect the Secured Party’s interests in the Collateral and shall not impose any duty upon the Secured Party in favor of any Grantor to exercise any such powers.  Except for the safe custody of any Collateral in its actual possession and the accounting for moneys actually received by it hereunder, the Secured Party shall not have any duty to any Grantor as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collater al.  The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property. Without limiting the generality of the foregoing, the Secured Party and Grantors hereby agree that when the Secured Party is in possession of

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any Collateral at such time as the Secured Obligations owing to the Secured Party have been paid in full the Secured Party may re-deliver such Collateral to the applicable Grantor.

13.Collection of Accounts, General Intangibles and Negotiable Collateral.  At any time upon the occurrence and during the continuation of an Event of Default, the Secured Party may (a) notify Account Debtors of any Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable Collateral have been assigned to the Secured Party or that the Secured Party has a security interest therein, and (b) collect the Accounts, General Intangibles and Negotiable Collateral directly, and any collection costs and expenses shall constitute part of the Secured Obligations.

14.Disposition of Pledged Interests by Secured Party.  None of the Pledged Interests existing as of the date of this Agreement are, and none of the Pledged Interests hereafter acquired on the date of acquisition thereof will be, registered or qualified under the various federal, state or other securities laws of the United States or any other jurisdiction, and disposition thereof after an Event of Default may be restricted to one or more private (instead of public) sales in view of the lack of such registration.  Each Grantor understands that in connection with such disposition, the Secured Party may approach only a restricted n umber of potential purchasers and further understands that a sale under such circumstances may yield a lower price for the Pledged Interests than if the Pledged Interests were registered and qualified pursuant to federal, state and other securities laws and sold on the open market.  Each Grantor, therefore, agrees that:  (a) if the Secured Party  shall, pursuant to the terms of this Agreement, sell or cause the Pledged Interests or any portion thereof to be sold at a private sale, the Secured Party shall have the right to rely upon the advice and opinion of any nationally recognized brokerage or investment firm (but shall not be obligated to seek such advice and the failure to do so shall not be considered in determining the commercial reasonableness of such action) as to the best manner in which to offer the Pledged Interest or any portion thereof for sale and as to the best price reasonably obtainable at the private sale thereof; and (b) such reliance shall be conclusive evide nce that the Secured Party has handled the disposition in a commercially reasonable manner.

15.Voting Rights.

(a)           Upon the occurrence and during the continuation of an Event of Default, (i) the Secured Party may, at its option, and with 2 Business Days prior notice to any Grantor, and in addition to all rights and remedies available the Secured Party under any other agreement, at law, in equity, or otherwise, exercise all voting rights, and all other ownership or consensual rights in respect of the Pledged Interests owned by such Grantor, but under no circumstances is the Secured Party obligated by the terms of this Agreement to exercise such rights, and (ii) if the Secured Party duly exercises its right to vote any of such Pledged Interests, each Grantor hereby appoints the Secured Party as such Grantor’s true and lawful attorney-in-fact and IRR EVOCABLE PROXY to vote such Pledged Interests in any manner that the Secured Party deems advisable for or against all matters submitted or which may be submitted to a vote of shareholders, partners or members, as the case may be.  The power-of-attorney granted hereby is coupled with an interest and shall be irrevocable.

(b)For so long as any Grantor shall have the right to vote the Pledged Interests owned by it, such Grantor covenants and agrees that it will not, without the prior written consent of the Secured Party, vote or take any consensual action with respect to such Pledged Interests which would materially adversely affect the rights of the Secured Party exercising the voting rights owned by such Grantor or the value of the Pledged Interests.

16.Remedies.  Upon the occurrence and during the continuance of an Event of Default:

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(a)The Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Transaction Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the Code, the PPSA or any other applicable law.  Without limiting the generality of the foregoing, each Grantor expressly agrees that, in any such event, the Secured Party without any demand, advertisement, or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon any Grantor or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum ext ent permitted by the Code or by any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Grantors to, and each Grantor hereby agrees that it will at its own expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at one or more locations where such Grantor regularly maintains Inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party’s offices or elsewhere, for cash, on credit, and upon such other terms as the Secured Party may deem commercially reasonable.  Each Grantor agrees that, to the extent notice of sale shall be required by law, at least 10 days notice to any Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notific ation and specifically such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the Code.  The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b)The Secured Party may seek the appointment of a receiver, receiver-manager or keeper (a “Receiver”) under the laws of Canada or any Province thereof to take possession of all or any portion of the Collateral or to operate same and, to the maximum extent permitted by law, may seek the appointment of such a Receiver without the requirement of prior notice or a hearing.  Any such Receiver shall, so far as concerns responsibility for his/her acts, be deemed agent of  the applicable Grantor and not the Secured Party, and the Secured Party shall not be in any way responsible for any misconduct, negligence or non-feasanc e on the part of any such Receiver, his/her servants or employees.  Subject to the provisions of the instrument appointing him/her, any such Receiver shall have power to take possession of Collateral, to preserve Collateral or its value, to carry on or concur in carrying on all or any part of the business of the applicable Grantor, and to sell, lease, license or otherwise dispose of or concur in selling, leasing, licensing or otherwise disposing of Collateral.  To facilitate the foregoing powers, any such Receiver may, to the exclusion of all others, including Grantors, enter upon, use and occupy all premises owned or occupied by Grantors wherein Collateral may be situated, maintain Collateral upon such premises, borrow money on a secured or unsecured basis, and use Collateral directly in carrying on Grantors’ business or as security for loans or advances to enable the Receiver to carry on Grantors’ business or otherwise, as such Receiver shall, in its discretion, determine.&# 160; Except as may be otherwise directed by the Secured Party, all money received from time to time by such Receiver in carrying out his/her appointment shall be received in trust for and paid over the Secured Party.  Every such Receiver may, in the discretion of the Secured Party, be vested with all or any of the rights and powers of the Secured Party.  The Secured Party may, either directly or through its nominees, exercise any or all powers and rights given to a Receiver by virtue of the foregoing provisions of this paragraph.

(c)The Secured Party is hereby granted a license or other right to use, without liability for royalties or any other charge, each Grantor’s labels, Patents, Copyrights, rights of use of any name, trade secrets, trade names, Trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property or any property of a similar nature, whether owned by any Grantor or with respect to which any Grantor has rights under license, sublicense, or other agreements (but only to the extent (i) such license, sublicense or agreement does not prohibit

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such use by the Secured Party and (ii) such Grantor will not be in default under such license, sublicense, or other agreement as a result of such use by the Secured Party), as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and each Grantor’s rights under all licenses and all franchise agreements shall inure to the benefit of the Secured Party.

(d)Any cash held by the Secured Party as Collateral and all proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Secured Obligations in the order set forth in Section 17 hereof.   In the event the proceeds of Collateral are insufficient to satisfy all of the Secured Obligations in full, each Grantor shall remain jointly and severally liable for any such deficiency.

(e)Each Grantor hereby acknowledges that the Secured Obligations arose out of a commercial transaction, and agrees that if an Event of Default shall occur and be continuing the Secured Party shall have the right to an immediate writ of possession without notice of a hearing.  Without limitation of Section 16(b) hereof, the Secured Party shall have the right to the appointment of a receiver for the properties and assets of each Grantor, and each Grantor hereby consents to such rights and such appointment and hereby waives any objection such Grantor may have thereto or the right to have a bond or other security posted by the Secured Party

17.Application of Proceeds of Collateral.  All proceeds of Collateral received by the Secured Party shall be applied as follows:

(a)           first, ratably to pay any expenses due to the Secured Party (including, without limitation, the reasonable costs and expenses paid or incurred by the Secured Party to correct any default under or enforce any provision of the Transaction Documents, or after the occurrence of any Event of Default in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated) or indemnities then due to the Secured Party under the Transaction Documents, until paid in full;

(b)           second, ratably to pay any fees or premiums then due to the Secured Party under the Transaction Documents, until paid in full;

(c)           third, ratably to pay interest due in respect of the Secured Obligations then due to the Secured Party, until paid in full;

(d)           fourth, ratably to pay the principal amount of all Secured Obligations then due to the Secured Party, until paid in full;

(e)           fifth, ratably to pay any other Secured Obligations then due to the Secured Party; and

(f)           sixth, to Grantors or such other Person entitled thereto under applicable law.

18.Remedies Cumulative.  Each right, power, and remedy of the Secured Party as provided for in this Agreement or in any Transaction Document or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement or in the Transaction Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by the Secured Party, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by the Secure d Party of any or all such other rights, powers, or remedies.

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19.Marshaling. The Secured Party shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Secured Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.  To the extent that it lawfully may, each Grantor hereby agrees that it will not invoke any law r elating to the marshaling of collateral which might cause delay in or impede the enforcement of the Secured Party’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Secured Obligations or under which any of the Secured Obligations is outstanding or by which any of the Secured Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Grantor hereby irrevocably waives the benefits of all such laws.

20.Acknowledgment.

(a)           The Secured Party hereby agrees and acknowledges that it is and shall remain solely responsible for the attachment, perfection and priority of all Liens created by this Agreement or any other Security Document in favor of the Secured Party. The Secured Party (which term, as used in this sentence, shall include reference to each Secured Party’s officers, directors, employees, attorneys, agents and affiliates and to the officers, directors, employees, attorneys and agents of the Secured Party’s affiliates) shall not: (i) have any duties or responsibilities except those expressly set forth in this Agreement and the other Security Documents or (ii) be required to take, initiate or conduct any enforcement action (including any litigation, foreclosure or collection proceedings hereunder or under any of the other Security Documents). The Secured Party does not assume any responsibility for any failure or delay in performance or breach by any Grantor of its obligations under this Agreement or any other Transaction Document.

(b)           The Secured Party hereby acknowledges and represents that it has, independently, and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of each Grantor and its own decision to enter into the Transaction Documents and to make the loan under the Note, and that it has made such inquiries concerning the Transaction Documents, the Collateral and each Grantor as the Secured Party feels necessary and appropriate. The Secured Party also hereby acknowledges that it will, independently and based upon such financial statements, documents and information as it deems appropriate at the time, continue to make and rely upon its own credit decisions in taking or refraining to take any other a ction under this Agreement or the Transaction Documents. Indemnity and Expenses.

(a)Each Grantor agrees to indemnify the Secured Party from and against all claims, lawsuits and liabilities (including reasonable attorneys’ fees) arising out of or resulting from a breach of this Agreement (including enforcement of this Agreement) or any other Transaction Document, except claims, losses or liabilities resulting from the gross negligence or willful misconduct of the party seeking indemnification as determined by a final non-appealable order of a court of competent jurisdiction.  This provision shall survive the termination of this Agreement and the Transaction Documents and the repayment of the Secured Obligations.

(b)Grantors, jointly and severally, shall, upon demand, pay to the Secured Party all of the costs and expenses which the Secured Party may incur in connection with (i) the custody, preservation, use or operation of, or, upon an Event of Default, the sale of, collection from, or other realization upon, any of the Collateral in accordance with this Agreement and the Transaction Documents, or (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder or (iii) the failure by any Grantor to perform or observe any of the provisions hereof.

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21.Merger, Amendments; Etc.  THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.  No waiver of any provision of this Agreement, and no consent to any departure by any of Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purp ose for which given.  No amendment of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Secured Party and each Grantor to which such amendment applies.

22.Addresses for Notices.  All notices and other communications provided for hereunder (a) shall be given in the form and manner set forth in the Note and (b) shall be delivered, (i) in the case of notice to any Grantor, by delivery of such notice to Parent at Parent’s address specified in the Note or at such other address as shall be designated by Parent in a written notice to the Secured Party in accordance with the provisions thereof, and (ii) in the case of notice to the Secured Party, by delivery of such notice to the Secured Party at its address specified in the Note or at such other address as shall be designated by the Secur ed Party in a written notice to Parent in accordance with the provisions thereof.

23.Continuing Security Interest; Assignments under Transaction Documents.  This Agreement shall create a continuing security interest in the Collateral in favor of the Secured Party and shall (a) remain in full force and effect until the Secured Obligations have been paid in full in cash in accordance with the provisions of the Transaction Documents, (b) be binding upon each of Grantors, and their respective successors and assigns, and (c) inure to the benefit of, and be enforceable by, the Secured Party and their respective successors, transferees and assigns.  Without limiting the generality of the foregoing clause (c), the Se cured Party may, in accordance with the provisions of the Transaction Documents, assign or otherwise transfer all or any portion of its rights and obligations under the Transaction Documents to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party herein or otherwise.  Upon payment in full in cash of the Secured Obligations in accordance with the provisions of the Transaction Documents, the Security Interest granted hereby shall terminate and all rights to the Collateral shall revert to Grantors or any other Person entitled thereto.  At such time, the Secured Party will authorize the filing of appropriate termination statements to terminate such Security Interest.  No transfer or renewal, extension, assignment, or termination of this Agreement or any other Transaction Document, or any other instrument or document executed and delivered by any Grantor to the Secured Party nor any additional loan s made by the Secured Party to any Grantor, nor the taking of further security, nor the retaking or re-delivery of the Collateral to Grantors, or any of them, by the Secured Party, nor any other act of the Secured Party, or any of them, shall release any of Grantors from any obligation, except a release or discharge executed in writing by the Secured Party.  The Secured Party shall not by any act, delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder, unless such waiver is in writing and signed by the Secured Party and then only to the extent therein set forth.  A waiver by the Secured Party of any right or remedy on any occasion shall not be construed as a bar to the exercise of any such right or remedy which the Secured Party would otherwise have had on any other occasion.

24.Governing Law; Jurisdiction; Service of Process; Jury Trial.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of Chicago, Illinois for the adjudication of any dis pute hereunder or in connection herewith or with any transaction contemplated

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hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper; provided, however, that any suit seeking enforcement against any Collateral or other property may be brought, at the Secured Party’s option, in the courts of any jurisdiction where the Secured Party elects to bring such action or where such Collateral or other property may be found.  Each party hereby irrevocably waives personal ser vice of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Without limitation of the foregoing, each Grantor other than Parent hereby irrevocably appoints Parent as such Grantor’s agent for purposes of receiving and accepting any service of process hereunder or under any of the other Security Documents.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

25.Miscellaneous.

(a)This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failu re to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other Security Document mutatis mutandis.

(b)Any provision of this Agreement which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

(c)Headings used in this Agreement are for convenience only and shall not be used in connection with the interpretation of any provision hereof.

(d)The pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction of sentences shall conform thereto.

(e)Unless the context of this Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Transaction Document refer to this Agreement or such other Transaction Document, as the case may be, as a whole and not to any particul ar provision of this Agreement or such other Transaction Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Agreement or in any other Transaction Document to any

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agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Secured Obligations shall mean the repayment in full in cash of all Secured Obligations other than unasserted contingent indemnification Secured Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

[signature pages follow]

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IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by and through their duly authorized officers, as of the day and year first above written.

GRANTORS:	WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act By:    Name:                    Title:
	6FIGUREJOBS.COM, INC., a Delaware corporation By:    Name:                    Title:                                           0;
	WORKSTREAM USA, INC., a Delaware corporation By:    Name:                    Title:                                           0;
	PAULA ALLEN HOLDINGS, INC., a Florida corporation By:    Name:                    Title:                                           0;
	THE OMNI PARTNERS, INC., a Florida corporation By:    Name:                    Title:                                           0;
	WORKSTREAM MERGER SUB INC., a Delaware corporation By:    Name:                    Title:                                           0;

SECURED PARTY: CCM MASTER QUALIFIED FUND, LTD.     By:         Name:                         Title:          

EXHIBIT A

COPYRIGHT SECURITY AGREEMENT

This COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”) is made this __ day of _______, 200__, by the Grantors listed on the signature pages hereof (collectively, jointly and severally, “Grantors” and each individually “Grantor”), in favor of the Secured Party under and as defined in the below-described Security Agreement.

W I T N E S S E T H:

WHEREAS, pursuant to that certain Senior Secured Note, dated as of August ___, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “Note”), executed by WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Parent”), in favor of the Secured Party, Parent has agreed to issue the Note to the Secured Party according to the terms and conditions set forth in the Note;

WHEREAS, in order to induce the Secured Party to make the loan under the Note, Grantors have executed and delivered to the Secured Party that certain Security Agreement of even date herewith (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to the Secured Party this Copyright Security Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

1.DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or the Note.

2.GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.  Each Grantor hereby grants to the Secured Party a continuing first priority security interest in all of such Grantor’s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Copyright Collateral”):

(a)all of each Grantor’s Copyrights and Copyright Intellectual Property Licenses to which it is a party including those referred to on Schedule I hereto;

(b)all reissues, continuations or extensions of the foregoing; and

(c)all products and proceeds of the foregoing, including any claim by such Grantor against third parties for past, present or future infringement or dilution of any Copyright or any Copyright licensed under any Intellectual Property License.

3.SECURITY FOR OBLIGATIONS.  This Copyright Security Agreement and the Security Interest created hereby secures the payment and performance of all the Secured Obligations, whether now existing or arising hereafter.  Without limiting the generality of the foregoing, this Copyright Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and

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would be owed by Grantors, or any of them, to the Secured Party whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

4.SECURITY AGREEMENT.  The security interest granted pursuant to this Copyright Security Agreement are granted in conjunction with the security interest granted to the Secured Party pursuant to the Security Agreement.  Each Grantor hereby acknowledges and affirms that the rights and remedies of the Secured Party with respect to its security interest in the Copyright Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

5.AUTHORIZATION TO SUPPLEMENT.  To the extent required under the Security Agreement, Grantors shall give the Secured Party prompt notice in writing of any additional copyright registrations or applications therefor after the date hereof.  Grantors hereby authorize the Secured Party unilaterally to modify this Agreement by amending Schedule I to include any material future registered copyrights or applications therefor of Grantors.  Notwithstanding the foregoing, no failure to so modify this Copyright Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from the Secured Party’s continuing security interest in all Collateral, whether or not listed on Schedule I.

6.COUNTERPARTS.  This Copyright Security Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.  In proving this Copyright Security Agreement or any other Transaction Document in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought.  Any signatures delivered by a party by facsimile transmission or by e-mail transmission shall be deemed an original signature heret o.

7.CONSTRUCTION.  Unless the context of this Copyright Security Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Copyright Security Agreement or any other Transact ion Document refer to this Copyright Security Agreement or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Copyright Security Agreement or such other Transaction Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Copyright Security Agreement unless otherwise specified.  Any reference in this Copyright Security Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Se cured Obligations shall mean the repayment in full in cash of all Secured Obligations other than unasserted contingent indemnification Secured Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

2

IN WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

GRANTORS:	WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act By:    Name:                    Title:                                           0;
	6FIGUREJOBS.COM, INC., a Delaware corporation By:    Name:                    Title:                                           0;
	WORKSTREAM USA, INC., a Delaware corporation By:    Name:                    Title:
	PAULA ALLEN HOLDINGS, INC., a Florida corporation By:    Name:                    Title:
	THE OMNI PARTNERS, INC., a Florida corporation By:    Name:                    Title:
	WORKSTREAM MERGER SUB INC., a Delaware corporation By:    Name:                    Title:                                           0;

COPYRIGHT SECURITY AGREEMENT

EXHIBIT B

PATENT SECURITY AGREEMENT

This PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is made this ___ day of _________, 200__, by the Grantors listed on the signature pages hereof (collectively, jointly and severally, “Grantors” and each individually “Grantor”), in favor of the Secured Party under and as defined in the below-described Security Agreement.

W I T N E S S E T H:

WHEREAS, pursuant to that certain Senior Secured Note, dated as of August ___, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “Note”), executed by WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Parent”), in favor of the Secured Party, Parent has agreed to issue the Note to the Secured Party according to the terms and conditions set forth in the Note;

WHEREAS, in order to induce the Secured Party to make the loan under the Note, Grantors have executed and delivered to the Secured Party that certain Security Agreement of even date herewith (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to the Secured Party this Patent Security Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

1.DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or the Note.

2.GRANT OF SECURITY INTEREST IN PATENT COLLATERAL.  Each Grantor hereby grants to the Secured Party a continuing first priority security interest in all of such Grantor’s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Patent Collateral”):

(a)all of its Patents and Patent Intellectual Property Licenses to which it is a party including those referred to on Schedule I hereto;

(b)all reissues, continuations or extensions of the foregoing; and

(c)all products and proceeds of the foregoing, including any claim by such Grantor against third parties for past, present or future infringement or dilution of any Patent or any Patent licensed under any Intellectual Property License.

3.SECURITY FOR OBLIGATIONS.  This Patent Security Agreement and the Security Interest created hereby secures the payment and performance of all the Secured Obligations, whether now existing or arising hereafter.  Without limiting the generality of the foregoing, this Patent Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and

would be owed by Grantors, or any of them, to the Secured Party whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

4.SECURITY AGREEMENT.  The security interest granted pursuant to this Patent Security Agreement are granted in conjunction with the security interest granted to the Secured  Party pursuant to the Security Agreement.  Each Grantor hereby acknowledges and affirms that the rights and remedies of the Secured Party with respect to its security interest in the Patent Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

5.AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights to any new patentable inventions or become entitled to the benefit of any patent application or patent for any reissue, division, or continuation, of any patent, the provisions of this Patent Security Agreement shall automatically apply thereto. To the extent required under the Security Agreement, Grantors shall give prompt notice in writing to the Secured Party with respect to any such new patent rights.  Without limiting each Grantor’s obligations under this Section 5, Grantors hereby author ize the Secured Party unilaterally to modify this Agreement by amending Schedule I to include any such new patent rights of Grantors.  Notwithstanding the foregoing, no failure to so modify this Patent Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from the Secured Party’s continuing security interest in all Collateral, whether or not listed on Schedule I.

6.COUNTERPARTS.  This Patent Security Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.  In proving this Patent Security Agreement or any other Transaction Document in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought.  Any signatures delivered by a party by facsimile transmission or by e-mail transmission shall be deemed an original signature hereto.

7.CONSTRUCTION.  Unless the context of this Patent Security Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Patent Security Agreement or any other Transaction Do cument refer to this Patent Security Agreement or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Patent Security Agreement or such other Transaction Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Patent Security Agreement unless otherwise specified.  Any reference in this Patent Security Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Secured Obligations shall mean the repayment in full in cash of all Secured Obligations other than unasserted contingent indemnification Secured Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

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IN WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

GRANTORS:	WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act By:    Name:                    Title:
	6FIGUREJOBS.COM, INC., a Delaware corporation By:    Name:                    Title:
	WORKSTREAM USA, INC., a Delaware corporation By:    Name:                    Title:
	PAULA ALLEN HOLDINGS, INC., a Florida corporation By:    Name:                    Title:
	THE OMNI PARTNERS, INC., a Florida corporation By:    Name:                    Title:
	WORKSTREAM MERGER SUB INC., a Delaware corporation By:    Name:                    Title:

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EXHIBIT C

TRADEMARK SECURITY AGREEMENT

This TRADEMARK SECURITY AGREEMENT (this “Trademark Security Agreement”) is made this ___ day of _________, 200__, by the Grantors listed on the signature pages hereof (collectively, jointly and severally, “Grantors” and each individually “Grantor”), in favor of the Secured Party under and as defined in the below-described Security Agreement.

W I T N E S S E T H:

WHEREAS, pursuant to that certain Senior Secured Note, dated as of August ___, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “Note”), executed by WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Parent”), in favor of the Secured Party, Parent has agreed to issue the Note to the Secured Party according to the terms and conditions set forth in the Note;

WHEREAS, in order to induce the Secured Party to make the loan under the Note, Grantors have executed and delivered to the Secured Party that certain Security Agreement of even date herewith (including all annexes, exhibits or schedules thereto, as from time to time amended, restated, supplemented or otherwise modified, the “Security Agreement”); and

WHEREAS, pursuant to the Security Agreement, Grantors are required to execute and deliver to the Secured Party this Trademark Security Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:

1.DEFINED TERMS.  All capitalized terms used but not otherwise defined herein have the meanings given to them in the Security Agreement or the Note.

2.GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL.  Each Grantor hereby grants to the Secured Party a continuing first priority security interest in all of such Grantor’s right, title and interest in, to and under the following, whether presently existing or hereafter created or acquired (collectively, the “Trademark Collateral”):

(a)all of its Trademarks and Trademark Intellectual Property Licenses to which it is a party including those referred to on Schedule I hereto;

(b)all goodwill, trade secrets, proprietary or confidential information, technical information, procedures, formulae, quality control standards, designs, operating and training manuals, customer lists, and other General Intangibles with respect to the foregoing;

(c)all reissues, continuations or extensions of the foregoing;

(d)all goodwill of the business connected with the use of, and symbolized by, each Trademark and each Trademark Intellectual Property License; and

(e)all products and proceeds of the foregoing, including any claim by such Grantor against third parties for past, present or future (i) infringement or dilution of any Trademark or any

Trademark licensed under any Intellectual Property License or (ii) injury to the goodwill associated with any Trademark or any Trademark licensed under any Intellectual Property License.

3.SECURITY FOR OBLIGATIONS.  This Trademark Security Agreement and the Security Interest created hereby secures the payment and performance of all the Secured Obligations, whether now existing or arising hereafter.  Without limiting the generality of the foregoing, this Trademark Security Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by Grantors, or any of them, to the Secured Party whether or not they are unenforceable or not allowable due to the existence of an Insolvency Proceeding involving any Grantor.

4.SECURITY AGREEMENT.  The security interest granted pursuant to this Trademark Security Agreement are granted in conjunction with the security interest granted to the Secured Party pursuant to the Security Agreement.  Each Grantor hereby acknowledges and affirms that the rights and remedies of the Secured Party with respect to its security interest in the Trademark Collateral made and granted hereby are more fully set forth in the Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein.

5.AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights to any new trademarks, the provisions of this Trademark Security Agreement shall automatically apply thereto. To the extent required under the Security Agreement, Grantors shall give prompt notice in writing to the Secured Party with respect to any such new trademarks or renewal or extension of any trademark registration.   Without limiting each Grantor’s obligations under this Section 5, Grantors hereby authorize the Secured Party unilaterally to modify this Agreement by amending Schedule I to include any such new trademark rights of Grantors.  Notwithstanding the foregoing, no failure to so modify this Trademark Security Agreement or amend Schedule I shall in any way affect, invalidate or detract from the Secured Party’s continuing security interest in all Collateral, whether or not listed on Schedule I.

6.COUNTERPARTS.  This Trademark Security Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.  In proving this Trademark Security Agreement or any other Transaction Document in any judicial proceedings, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom such enforcement is sought.  Any signatures delivered by a party by facsimile transmission or by e-mail transmission shall be deemed an original signature heret o.

7.CONSTRUCTION.  Unless the context of this Trademark Security Agreement or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Trademark Security Agreement or any other Transact ion Document refer to this Trademark Security Agreement or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Trademark Security Agreement or such other Transaction Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Trademark Security Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Secured Obligations s hall mean the repayment in full in cash of all Secured Obligations other than

2

unasserted contingent indemnification Secured Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Transaction Document shall be satisfied by the transmission of a Record and any Record so transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

[signature pages follow]

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IN WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

GRANTORS:	WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act By:    Name:                    Title:
	6FIGUREJOBS.COM, INC., a Delaware corporation By:    Name:                    Title:
	WORKSTREAM USA, INC., a Delaware corporation By:    Name:                    Title:
	PAULA ALLEN HOLDINGS, INC., a Florida corporation By:    Name:                    Title:
	THE OMNI PARTNERS, INC., a Florida corporation By:    Name:                    Title:
	WORKSTREAM MERGER SUB INC., a Delaware corporation By:    Name:                    Title:

EX-10.5

Exhibit 10.5

GUARANTY

This Guaranty is made this 13th day of August 2010, by such Guarantors listed on the signature pages hereof (collectively, jointly and severally, “Guarantors”, and each, individually, a “Guarantor”), in favor of CCM Master Qualified Fund, Ltd. (together with its successors and assigns, “Noteholder”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Senior Secured Note, dated as of August 13, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, collectively, the “Note”), executed by WORKSTREAM INC., a corporation existing pursuant to the Canada Business Corporations Act (“Parent”), in favor of Noteholder, Parent has agreed to issue the Note to the Noteholder according to the terms and conditions set forth in the Note;

WHEREAS, each Guarantor is a direct of indirect wholly-owned Subsidiary of Parent and will receive direct and substantial benefits from the issuance of the Note;

WHEREAS, in order to induce Noteholder to make the loan under the Note, Guarantors have agreed to jointly and severally guaranty all of Parent’s obligations under and with respect to the Note; and

WHEREAS, in connection herewith, Guarantors, Parent and Noteholder have entered into that certain Security Agreement dated of even date herewith (as amended, restated, supplemented, or otherwise modified from time to time, including all schedules thereto, the “Security Agreement”), pursuant to which Guarantors and Parent (Guarantors and Parent, collectively, “Obligors” and each, individually, an “Obligor”) have granted Noteholder continuing security interests in all assets of each Obligor, as more fully set forth in the Security Agreement.

NOW, THEREFORE, for and in consideration of the recitals made above and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, each Guarantor hereby agrees as follows:

1.           Definitions. All capitalized terms used herein that are not otherwise defined herein shall have the meanings given them in the Security Agreement.

2.           Guaranteed Obligations. Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Noteholder the due and punctual payment in full of all of the present and future payment and performance obligations of each Obligor arising under the Note payable to Noteholder, the Security Agreement, and the other Transaction Documents(as defined in the Notes), including, without duplication, reasonable attorneys’ fees and expenses and any interest, fees, or expenses that accrue after the filing of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any Ins olvency Proceeding (collectively, the “Guaranteed Obligations”).

3.           Guarantors’ Representations and Warranties.  Each Guarantor represents and warrants to Noteholder that such Guarantor expects to derive substantial benefits from the issuance of the Note and the other transactions contemplated hereby. Noteholder may rely conclusively on a continuing warranty, hereby made, that such Guarantor continues to be benefited by this Guaranty and Noteholder shall have

no duty to inquire into or confirm the receipt of any such benefits, and this Guaranty shall be effective and enforceable by Noteholder without regard to the receipt, nature or value of any such benefits.

4.           Unconditional Nature.  No act or thing need occur to establish any Guarantor’s liability hereunder, and no act or thing, except full payment and discharge of all of the Guaranteed Obligations, shall in any way exonerate any Guarantor hereunder or modify, reduce, limit or release any Guarantor’s liability hereunder.  This is an absolute, unconditional and continuing guaranty of payment of the Guaranteed Obligations and shall continue to be in force and be binding upon each Guarantor until the termination of this Guaranty pursuant to Section 12 hereunder.

5.           Subrogation. No Guarantor will exercise or enforce any right of contribution, reimbursement, recourse or subrogation available to such Guarantor as to any of the Guaranteed Obligations, or against any Person liable therefor, or as to any collateral security therefor, unless and until all of the Guaranteed Obligations shall have been indefeasibly paid in full and discharged.

6.           Enforcement Expenses.  Each Guarantor shall pay or reimburse Noteholder for all reasonable costs, expenses and attorneys’ fees paid or incurred by Noteholder in endeavoring to collect and enforce the Guaranteed Obligations and in enforcing this Guaranty.

7.           Obligations Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than the indefeasible payment in full and discharge of the Guaranteed Obligations.  In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees that none of its obligations hereunder shall be affected or impaired by any of the following acts or things (which Noteholder is expressly authorized to do, omit or suffer from t ime to time, without consent or approval by or notice to any Guarantor): (a) any acceptance of collateral security, guarantors, accommodation parties or sureties for any or all of the Guaranteed Obligations; (b) one or more extensions or renewals of the Guaranteed Obligations (whether or not for longer than the original period) or any modification of the interest rates, maturities, if any, or other contractual terms applicable to any of the Guaranteed Obligations or any amendment or modification of any of the terms or provisions of any of the Transaction Documents; (c) any waiver or indulgence granted to Parent or any other Obligor, any delay or lack of diligence in the enforcement of the Guaranteed Obligations, or any failure to institute proceedings, file a claim, give any required notices or otherwise protect any of the Guaranteed Obligations; (d) any full or partial release of, compromise or settlement with, or agreement not to sue, Parent, any other Obligor or any other Person liable in respect of any of the Guaranteed Obligations; (e) any release, surrender, cancellation or other discharge of any evidence of the Guaranteed Obligations or the acceptance of any instrument in renewal or substitution therefor; (f) any failure to obtain collateral security (including rights of setoff) for the Guaranteed Obligations, or to see to the proper or sufficient creation and perfection thereof, or to establish the priority thereof, or to preserve, protect, insure, care for, exercise or enforce any collateral security; or any modification, alteration, substitution, exchange, surrender, cancellation, termination, release or other change, impairment, limitation, loss or discharge of any collateral security; (g) any collection, sale, lease or disposition of, or any other foreclosure or enforcement of or realization on, any collateral security; (h) any assignment, pledge or other transfer of any of the Guaranteed Obligations or any evidence thereof; or (i) any manner, order or me thod of application of any payments or credits upon the Guaranteed Obligations. Each Guarantor waives any and all defenses and discharges available to a surety, guarantor or accommodation co-obligor.

8.           Waivers by Guarantors.  Each Guarantor waives any and all defenses, claims, setoffs and discharges of Parent, or any other Obligor or Person, pertaining to the Guaranteed Obligations, except the defense of discharge by indefeasible payment in full. Without limiting the generality of the foregoing, no

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Guarantor will assert, plead or enforce against Noteholder any defense of waiver, release, discharge or disallowance in any Insolvency Proceeding, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality or unenforceability which may be available to Parent or any other Obligor or Person liable in respect of any of the Guaranteed Obligations, or any setoff available to Noteholder against Parent or any other such Obligor or Person, whether or not on account of a related transaction. Each Guarantor expressly agrees that such Guarantor shall be and remain liable for any deficiency remaining after foreclosure of any mortgage or security interest securing the Guaranteed Obligations, whether or not the liability of Parent or any other Obligor or Person for such defic iency is discharged pursuant to statute or judicial decision.  The liability of each Guarantor shall not be affected or impaired by any voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar event or proceeding affecting, Parent or any of its assets. No Guarantor will assert, plead or enforce against Noteholder any claim, defense or setoff available to such Guarantor against Parent. Each Guarantor waives presentment, demand for payment, notice of dishonor or nonpayment and protest of any instrument evidencing the Guaranteed Obligations.  Noteholder shall not be required first to resort for payment of the Guaranteed Obligations to Parent or any other Person, or their properties, or first to enforce, realize upon or exhaust any collat eral security for the Guaranteed Obligations, before enforcing this Guaranty.

9.           If Payments Set Aside, etc.  If any payment applied by Noteholder to the Guaranteed Obligations is thereafter set aside, recovered, rescinded or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Parent or any other Obligor or Person), the Guaranteed Obligations to which such payment was applied shall for the purpose of this Guaranty be deemed to have continued in existence, notwithstanding such application, and this Guaranty shall be enforceable as to such Guaranteed Obligations as fully as if such application had never been made.

10.           Additional Obligation of Guarantors.  Each Guarantor’s liability under this Guaranty is in addition to and shall be cumulative with all other liabilities of such Guarantor to Noteholder as guarantor, surety, endorser, accommodation co-obligor or otherwise of any of the Guaranteed Obligations, without any limitation as to amount.

11.           No Duties Owed by Noteholder.  Each Guarantor acknowledges and agrees that Noteholder (a) has not made any representations or warranties with respect to, (b) does not assume any responsibility to such Guarantor for, and (c) has no duty to provide information to such Guarantor regarding, the enforceability of any of the Guaranteed Obligations or the financial condition of Parent or any other Obligor or Person.  Each Guarantor has independently determined the creditworthiness of Parent and the enforceability of the Guaranteed Obligations and until the Guaranteed Obligations are paid in fu ll will independently and without reliance on Noteholder continue to make such determinations.

12.           Termination.  This Guaranty and the obligations of each Guarantor hereunder shall be deemed to be satisfied, released and fully discharged when all of the Guaranteed Obligations are indefeasibly paid in full and discharged.

13.           Miscellaneous.

(a)        This Guaranty may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Guaranty. Delivery of an executed counterpart of this Guaranty by telefacsimile or other electronic method of transmission shall be

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equally as effective as delivery of an original executed counterpart of this Guaranty.  Any party delivering an executed counterpart of this Guaranty by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Guaranty but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Guaranty.

(b)        Any provision of this Guaranty which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

(c)        Headings used in this Guaranty are for convenience only and shall not be used in connection with the interpretation of any provision hereof.

(d)        The pronouns used herein shall include, when appropriate, either gender and both singular and plural, and the grammatical construction of sentences shall conform thereto.

(e)        Unless the context of this Guaranty or any other Transaction Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and  “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Guaranty or any other Transaction Document refer to this Guaranty or such other Transaction Document, as the case may be, as a whole and not to any particular provision of this Guaranty or such other Transaction Document, as the case ma y be.  Section, subsection, clause, schedule, and exhibit references herein are to this Guaranty unless otherwise specified.  Any reference in this Guaranty or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Guaranteed Obligations shall mean the repayment in full in cash of all Guaranteed Obligations other than unasserted contingent indemnification Guaranteed Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.

(f)        This Guaranty shall be effective upon delivery to Noteholder, without further act, condition or acceptance by Noteholder, shall be binding upon each Guarantor and the successors and assigns of each Guarantor, and shall inure to the benefit of Noteholder and its participants, successors and assigns.  This Guaranty may not be waived, modified, amended, terminated, released or otherwise changed except by a writing signed by each Guarantor and Noteholder.

14.           Notices.  All notices and other communications provided for hereunder shall be given in the form and manner, and delivered to such addresses, as specified in the Security Agreement.

15.           Governing Law; Jurisdiction; Service of Process; Jury Trial.  All questions concerning the construction, validity, enforcement and interpretation of this Guaranty shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each Guarantor hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of Chicago, Illinois, fo r the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any

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such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper; provided, however, that any suit seeking enforcement of this Guaranty may be brought, at Noteholder’s option, in the courts of any jurisdiction where Noteholder elects to bring such action. Each Guarantor hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Guaranty and agrees that such service shall constitute good and sufficient service of process and notice thereof. Without limitation of the foregoing, each Guarantor hereby irrevocably appoints Parent as such Guarantor’s agent for purposes of receiving an d accepting any service of process hereunder.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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IN WITNESS WHEREOF, this Guaranty has been duly executed by each Guarantor as of the date set forth above.

6FIGUREJOBS.COM, INC., a Delaware corporation

By:  

Name: 

Title:  

WORKSTREAM USA INC., a Delaware corporation

By:                                                    

Name: 

Title:    

PAULA ALLEN HOLDINGS, INC., a Florida corporation

   By:      

Name:  

Title:    

OMNIPARTNERS, INC., a Florida corporation

By:      

Name:                                                                

Title:       

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EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

           THIS EMPLOYMENT AGREEMENT is made as of the 13th day of August, 2010

BETWEEN:

JOHN LONG,

1810 Oceanview Drive

Tierra Verde, FL  33715

(hereinafter referred to as the "Employee")

AND:

WORKSTREAM INC.,

a corporation incorporated under the laws of  Canada

(hereinafter referred to as the "Employer")

WHEREAS:

The Employer wishes to employ the Employee and the Employee wishes to serve the Employer upon the terms and subject to the conditions herein contained.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties hereto, intending to be legally bound, covenant and agree as follows:

1.   DEFINITIONS

In this Agreement, unless the context otherwise specifies or requires, the following terms shall have the following meanings:

1.1 "Agreement," "hereto," "herein," "hereof," "hereunder" and similar expressions refer to this Agreement and not to any particular section or any particular portion of this Agreement and includes all schedules attached to this Agreement;

1.2 "Court" shall mean a Court of competent jurisdiction;

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1.3 "Parties" shall mean the parties to this Agreement and "Party" shall mean one of the parties to this Agreement.

2.   EMPLOYMENT  

2.1 The Employer agrees to employ the Employee, and the Employee agrees to act, as Chief Executive Officer of the Employer, or in such other position as the Employer and the Employee may from time to time agree, upon the terms and subject to the conditions set out in this Agreement.  For so long as the Employee remains employed by the Employer as Chief Executive Officer, Employee shall be appointed to serve as a member of the Board of Directors of the Employer; provided, however, that the Employer will not be entitled to additional compensation or benefits in connection with his serving as a member of the Board of Directors.

2.2 The Employee specifically undertakes and agrees with the Employer that he shall be responsible for the following:

2.2.1   for fulfilling the title and role of the Chief Executive Officer of the Employer, and for fulfilling the duties and responsibilities typical of a Chief Executive Officer; and

2.2.2   such other duties and responsibilities as may be reasonably required, as determined by the Board of Directors of the Employer.

2.3 The Employee may perform such duties and responsibilities from a home office located in St. Petersburg, Florida; provided, however, that he shall be required to be present at the Company’s principal office from time to time as circumstances require or as the Board of Directors shall reasonably request.

3.   TERM

3.1 The initial term of this Agreement shall be a period of three (3) years from the date hereof (the “Initial Term”).  Unless written notice is given by either party at least one hundred twenty (120) days before the end of the Initial Term or any one (1) year extension thereof (each, a “Renewal Term”) that it wishes this Agreement to terminate at the end of the Initial Term or relevant Renewal Term, as the case may be, this Agreement will be

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automatically extended by successive one year Renewal Terms.  Any references herein to the “Term” shall include both the Initial Term and any and all Renewal Terms.

4.          REMUNERATION

4.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by all parties to this Agreement, pay and grant the following remuneration to the Employee:

4.1.1 Base Salary.  The Employee shall be entitled to receive an initial base salary of not less than $250,000 per year.  Such base salary shall be reviewed from year to year and may be adjusted in the sole discretion of the Board of Directors of the Employer (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”).

4.1.2     Annual Bonus.  In addition to the base salary specified in Section 4.1.1 and any other bonus set forth under this Section 4.1, the Employee shall be entitled each fiscal year (including the fiscal year ending May 31, 2011) to a performance bonus of up to 100%of his then current base salary based on the achievement of certain targets for each fiscal year to be mutually agreed upon by the Employer and Employee.  For the purpose of clarity,  the Employee shall be entitled to a prorated performance bonus for the period beginning on the date of this Agreement and ending on the last day of the Company’s current fiscal year.   The amount of such prorated bonus, if earned, will be equal to the amount of the bonus earned multiplied by a fraction, the numerator of which shall be the number of days between the execution of this Agreement and the end of the fiscal year and the denominator of which shall be 365.  Any bonus earned for a particular fiscal year of the Employer will be paid to the Employee within 45 days after the end of such fiscal year and will be payable in cash unless the Board or Compensation Committee determines, in its sole discretion, to pay up to, but not more than, 50% of such bonus in fully vested Restricted Stock Units in the Employer.

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4.1.3 Restricted Stock Units and Options.  In addition to the base salary and bonus described in Sections 4.1.1 and 4.1.2 above, upon commencement of his employment under this Agreement, the Employer shall grant to the Employee 20,348,798 Restricted Stock Units in the Employer (the “RSUs”) and options to purchase 10,174,399 shares of the Employer’s common shares at a price of $.01977 per share (the “Options”), each under and subject to the terms of the Employer’s Amended and Restated 2002 Stock Option Plan.  The RSUs and Options shall vest in equal quarterly installments beginning on the three (3) month anniversary of the date of the grant (which shall be the date of this Agreement), such that one-twelfth (1/12) of the RSUs and Options vest on the three month anniversary of the date of grant and one-twelfth (1/12) of the RSUs and Options vest on each subsequent three-month anniversary date until all such RSUs and Options have vested.  Upon separation for any reason, Employee will be entitled to any RSUs and Options then vested.  In the event of a Change of Control (as hereinafter defined), all of the Employee’s RSUs and Options then outstanding shall vest and become immediately exercisable in full.  For purposes of this Agreement, “Change of Control” shall mean (a) a merger or consolidation of the Employer into or with, or any sale, transfer, exchange, conveyance or other disposition of the Employer’s capital stock to, any other person or persons who are not affiliates of the Employer in a single transaction or a series of related transactions, in which the stockholders of the Employer immediately prior to such related transaction or first of such series of transactions, directly or indirectly possess less than fifty percent (50%) of the Employer’s iss ued and outstanding voting capital stock immediately after such related transaction or series of such transactions; or (b) a single transaction or series of transactions pursuant to which a person or persons who are not affiliates of the Employer acquire all or substantially all of the Employer’s assets.  The Employer may withhold from any RSU grant or payment the amount necessary to satisfy any federal, state, local or other withholding tax requirements relating to such RSU grant or payment.  In connection therewith, the Employer may withhold or receive Common Shares or other property and to make cash payments in respect thereof in satisfaction of the Employee’s tax obligations, and such tax obligations may be satisfied, in whole or in part, by reducing a portion of the Common Shares to be received in connection with any such award or payment in an amount equal to the minimum amount required to be withheld.

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5. BENEFITS

5.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by both parties to this Agreement, pay and grant the following benefits to the Employee:

5.1.1 Vacation.  The Employee shall be entitled to vacation time of four (4) weeks each calendar year.  Such vacation time shall be used at times mutually agreeable to the Employee and the Employer.  The Employee acknowledges that unused vacation time may not be carried forward except in accordance with standard Employer policy.

5.1.2 Other Benefits.  The Employee shall be entitled to participate in all benefit programs that may be generally provided by the Employer from time to time to its executive officers.  The Employer shall pay for family coverage premiums for the Employee for health and dental (if any) insurance offered by the Employer. The Employer shall pay for the Employee’s Life Insurance, STD/LTD premiums, or similar benefit plans or programs that may then be generally offered from time to time to the Employer’s officers.

5.1.3 Expenses.  Employer shall reimburse the Employee for all reasonable and necessary business expenses, including but not limited to travel and cellular phone expenses, upon the presentation to the Employer of appropriate written documentation and receipts.

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6. ATTENTION TO DUTIES

The Employee shall devote his whole working time and attention to the Employer during the Term of this Agreement and will not engage in any other business capacity or activity which, in the sole opinion of the Employer acting reasonably, would hinder or interfere with the performance of the duties of the Employee.  The employer and Employee acknowledge that the Employee is a principal of Yardley Capital Advisors, LLC (“Yardley”) and will continue his involvement with Yardley during the Term, provided that such involvement will not interfere with the Employee’s performance of his obligations hereunder.

7. CONFIDENTIALITY

The parties acknowledge that in carrying out his duties under this Agreement, the Employee will have access to and become entrusted with confidential information regarding the business plans and operations of the Employer, computer systems and technology, unique methodology and other proprietary information.  The Employee acknowledges that the right to maintain such detailed confidential information constitutes a proprietary right, which the Employer is entitled to protect.  Accordingly, the Employee shall not, during the Term of this Agreement, or at any time thereafter, disclose any of such detailed confidential information or trade secrets of the Employer to any person or persons, firm, association or corporation, nor shall the Employee use the same for any purpose, in either case, except on behalf of the Employ er.  Notwithstanding the foregoing, the obligations of the Employee in this Section 7 shall not apply to confidential information (i) which at the date hereof or thereafter becomes a matter of public knowledge without breach by the Employee of this Agreement; (ii) which is obtained by the Employee from a person, firm, or entity (other than the Employer or an affiliate of the Employer) under circumstances permitting its use or disclosure to others; or (iii) which is required to be disclosed pursuant to any applicable law or court order.

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8. OWNERSHIP OF INVENTIONS

8.1 The Employee shall promptly communicate and disclose to the Employer all inventions, improvements, modifications, discoveries, designs, formulae, methods and processes made, discovered or conceived by the Employee either alone or jointly with others, during the period of his employment with the Employer, providing the same relate to or are capable of being used by the corporation or any affiliate thereof in the normal course of their businesses.

8.2 The Employee acknowledges and declares that all inventions, improvements, modifications, discoveries, designs, formulae, methods, processes, as are described in section 8.1 hereof, and all patents and patent applications relating thereto are the property of the Employer and hereby assigns to the Employer all of the right, title and interest of the Employee in any such inventions, improvements, modifications, discoveries, designs, formulae, methods and processes, and in any patents or patent applications relating thereto.  The Employee shall, at the Employer’s expense, execute all instruments and documents and do all such further acts and things as may be necessary or desirable, in the Employer's opinion to carry out the provisions of this section.

9.        TERMINATION

9.1 The Parties understand and agree that employment pursuant to this Agreement may be terminated during the Term in the following manner in the specified circumstances:

9.1.1 by the Employee without “good reason” (as defined below) on the giving of not less than thirty (30) days prior written notice to the Employer, which the Employer may waive, in whole or in part;

9.1.2 by the Employee for “good reason” on the giving of not less than thirty (30) days prior written notice to the Employer, if the Employer has not reasonably cured the event giving rise to the good reason by the end of such notice period.  For purposes of this Agreement, “good reason” shall mean, absent the Employee’s prior written consent: (i) the Employer’s failure to timely provide the Employee with the salary and bonuses as set forth in Section 4 hereof or to provide benefits to the Employee in accordance with Section 5 hereof; (ii) a material breach by the Employer of this Agreement; (iii) the assignment to the Employee of duties or responsibilities that are materially inconsistent with the Employee’s position with the Employer or a material and significant diminution by the Employer in the Employee’s title, responsibilities, authority or reporting stru cture; or (iv) failure of the Employer to ensure that any successor or assign of the Employer agrees in writing to be bound by the terms of this Agreement.  If the Employee terminates his employment for good reason, he shall be entitled to the severance payments, benefits and pro rated bonus payment to which he may be entitled as set forth in Section 9.1.3 hereof;

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9.1.3 by the Employer in its absolute discretion without “cause” (as defined below) upon not less than thirty (30) days prior written notice to the Employee, in which case the Employer shall pay the Employee (a) severance equal to his then current salary for a period of six (6) months following the date of termination, (b) the benefits provided for in Section 5.1.2 for a period ending on the earlier of six (6) months after the effective date of termination or the date on which the Employee obtains employment pursuant to which he receives comparable benefits to those provided hereunder, and (c) a prorated bonus for the year in which the termination occurred (based on the ratio of the number of days in such year the Employee was employed by the Employer to 365) based upon actual results for the full year as provided pursuant to Section 4.1.2, payable at the time the bonus for such year would have otherwise b een paid.  The severance is to be payable in accordance with the Employer’s normal payroll practice following the effective date of his termination of employment.  In no event shall the Employee be required to seek other employment or take any other action in order to mitigate the amounts payable to the Employee under this Section 9.1 and, unless specifically provided hereunder, such amounts shall not be reduced whether or not the Employee obtains employment following termination of his employment hereunder;

9.1.4 by the Employer for “cause,” effective immediately upon written notice to the Employee of such cause.  The Parties agree that for the purposes of this Agreement, “cause” shall mean the following, as reasonably determined by the Employer in good faith:

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9.1.4.1 any material breach of the provisions of this Agreement or of an established written policy of the Employer after Employer has provided written notice to Employee and a ten (10) day period to cure such breach, during which time the Employee failed to cure such breach;

9.1.4.2 any intentional or grossly negligent disclosure of any confidential information, as described in section 7 hereof, by the Employee;

9.1.4.3 in carrying out his duties hereunder, the Employee (i) has been grossly negligent, or (ii) has committed willful gross misconduct, the result of which is injurious to the Employer;

9.1.4.4 personal conduct on the Employee’s part which is of such a serious and substantial nature that, as reasonably determined in good faith in the sole discretion of the Employer, it would materially injure the reputation, operations or financial condition of the Employer;

9.1.4.5 misconduct involving fraud, dishonesty, or illegality with respect to the Employer; or

9.1.4.6 being convicted of a felony or crime of moral turpitude.

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9.2 The Parties understand and agree that the giving of notice or the payment of termination pay, and severance pay, as required by the Employer to the Employee on termination shall not prevent the Employer from alleging cause for the termination.

9.3 The Employee authorizes the Employer to deduct from any payment any amounts properly owed to the Employer by the Employee by reason of advances, loans or in recommence for damages to or loss of the Employer's property and equipment, save only that this provision shall be applied so as not to conflict with any applicable law or legislation.

10. RESULTS OF TERMINATION

10.1 If this Agreement is terminated by the Employee without good reason or by the Employer for cause, as described in Sections 9.1.1 and 9.1.4 hereof, respectively, the Employee shall be entitled to receive his remuneration to the date of such termination and reimbursement of expenses as provided in Section 5.1.3 and any and all vacation pay and bonuses earned to date, if any, and no other amounts.

10.2 If this Agreement is terminated upon written notice as described in Sections 9.1.2, and 9.1.3 hereof, the Employer shall pay to the Employee to the end of the notice period his salary and at the end of the date terminating the notice provision, the Employer shall pay to the Employee reimbursement for expenses as provided in Section 5.1.3 and vacation pay equivalent and any other monies due under applicable United States federal or state law, as well as any and all amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3.

10.3 As a condition to the Employer’s obligation to pay any such amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3, the Employer may require the Employee to execute a Release and Settlement Agreement waiving all known or unknown claims against the Employer, in a form and substance requested by the Employer in its sole discretion.

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11. NON-COMPETITION AND NON-SOLICITATION

11.1 The Employee shall not, while employed by the Employer and for six (6) months thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.1.1 engage or participate, directly or indirectly, in any business activity competitive with any Line of Business of the Employer at the time the employment is terminated.  For purposes of this Agreement, the term “Line of Business” means any product of the Employer which generates or has generated 15% or more of the Employer’s revenues during the one (1) year period prior to the effective date of termination; or

11.1.2 become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any portion of the business of any person, firm, corporation, association or other entity where such business is competitive with any Line of Business as defined in Section 11.1.1; provided, however, that notwithstanding the foregoing, the Employee may own not more than five percent (5%) of the outstanding securities of a company whose securities are publicly traded.

11.2 The Employee shall not, while employed by the Employer and for two (2) years thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.2.1 solicit, call on or transact or engage in any direct or direct business activity, for a purpose competitive with the Business, with any (i) customer with whom the Employer or its affiliates shall have dealt at any time preceding the termination of the Employee’s employment, or (ii) independent contractor or supplier with which the Employer or its affiliates shall have dealt at any time during the one (1) year period preceding the termination of the Employee’s employment; or

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11.2.2 influence or attempt to influence any then current or prospective supplier, customer or independent contractor of the Employer or its affiliates to terminate or modify any written or oral agreement or business relationship with the Employer or such affiliate; or

11.2.3 influence or attempt to influence any person either (i) to terminate or modify an employment, consulting or other arrangement with the Employer or its affiliates, or (ii) to employ or retain, or arrange to have any other person or entity employ or retain, any person who is then or has been employed or retained by the Employer or its affiliates as an employee or consultant of the Employer at any time during the one (1) year period immediately preceding the termination of the Employee’s employment.

11.3 The Employee acknowledges that he has carefully read and considered the provisions of this Section 11.  The Employee acknowledges that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the Business, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the payment by the Employer of the compensation set forth herein to justify such restrictions, which restrictions the Employee does not believe would prevent him from earning a living in businesses that are not competitive with the Business and without otherwise violating the restrictions set forth herein.

12. MEDIATION/ARBITRATION

12.1 Should any dispute or disagreement of any kind arise at any time: (a) regarding the rights and liabilities of the Parties hereof or with respect to the interpretation, validity, construction, meaning, performance, effect or application of this Agreement, as amended from time to time; or (b) between the Employer and the Employee, the Parties agree that good faith negotiations shall take place between the Employer and the Employee.  If such good faith negotiations have not resolved the dispute or disagreement within a reasonable period of time, either Party may request mediation between the Parties, or either Party may refer the dispute or disagreement directly to arbitration without going to mediation.

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12.2 The mediator shall be agreed upon by the both Parties.  In the event that the Parties are unable to agree upon the mediator, the dispute or disagreement shall be referred to arbitration in accordance with this Section.

12.3 All discussions before the mediator shall be non-binding, confidential and without prejudice to the position of either Party.  The Parties agree that if the mediation process does not result in a satisfactory solution of the dispute or disagreement after the lesser of either: (a) ten (10) hours of mediation, or (b) thirty (30) days from the commencement of the mediation, then either Party may refer the dispute or disagreement to arbitration pursuant to the provisions of the American Arbitration Association's National Rules for the Resolution of Employment Disputes in effect at the time of the arbitration demand, in accordance with the following:

12.3.1 the reference to arbitration shall be to one (1) arbitrator.

12.3.2 any such arbitration shall be held in the city of Orlando, Florida.  The arbitration shall be completely private.  The arbitrator shall fix the appropriate procedures which may include discovery, an oral hearing(s) and any other procedures the arbitrator deems appropriate.  The issue or issues to be decided by the arbitrator shall be defined in an arbitration agreement filed on consent by the aggrieved Party.  In the event the Parties to the arbitration shall be unable to agree upon the issue or issues to be decided by the arbitrator in any arbitration pursuant to this paragraph, the arbitrator shall have jurisdiction to determine the issue or issues to be so decided.  The Parties shall do all such acts and things as are necessary to enable the arbitrator to make a proper finding respecting the matters in issue.  The arbitrator may order interest on any award and the arbitrator may award costs, including attorneys’ fees, to either Party, provided that such award is permitted by the applicable law governing the underlying claim.  In the absence of any award of costs, each of the Parties shall bear their own costs, including attorneys’ fees, of any arbitration pursuant to this paragraph and one-half of the cost of the arbitrator.  The arbitrator shall be strictly bound by applicable legal principles and the general nature of this Agreement in rendering his or her decision.

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12.3.3 The Parties agree that good faith negotiations, mediation and arbitration shall all be without recourse to the Courts.  The award of the arbitrator shall be final and binding, except that either Party may appeal an arbitration award to the Courts on a question of law.  Judgment upon the award rendered by the arbitrator may be entered in any Court having jurisdiction.

13. RIGHT TO INJUNCTIVE RELIEF

As a violation by the Employee of the provisions of Sections 7, 8 and 11 hereof could cause irreparable injury to the Employer and there is no adequate remedy at law for such violation, the Employer shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin the Employee in a court of equity from violating such provisions.  The provisions of Sections 7, 8 and 11 hereof shall survive the termination of this Agreement.

14. ASSIGNMENT OF RIGHTS

The rights and obligations which accrue to the Employer under this Agreement shall automatically inure to the benefit of and be binding on its successors and assigns, whether by operation of law or otherwise. The rights of the Employee under this Agreement are not assignable or transferable in any manner, except that any accrued salary or bonus, vested options or other benefits shall be provided to the Employee’s heirs, beneficiaries or estate, or trustee under any trust set up by and for Employee.

15. INDEMNIFICATION

The Employer agrees to maintain reasonably sufficient liability insurance and to fully indemnify and defend the Employee, during and after the Term, against all claims, liabilities, costs, attorneys’ fees, settlement payments and damages against the employee arising from the Employee’s good faith actions taken in the performance of the Employee’s duties as provided in the By-Laws of the Employer.

16. CURRENCY

All dollar amounts referred to in this Agreement shall be denominated in United States funds.

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17. AMENDMENT OF AGREEMENT

This Agreement may be altered or amended at any time only by the mutual consent in writing of the Parties hereto.

18. TIME OF ESSENCE

Time shall be of the essence hereof.

19. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to the principles of conflicts of laws of any jurisdiction.

20. HEADINGS

The headings appearing throughout this Agreement are inserted for convenience only and form no part of the Agreement.

21. SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision hereof and any such invalid or unenforceable provision will be deemed to be severable.

22. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings and discussions, whether oral or written, and there are no other warranties, agreements or representations between the parties except as expressly set forth herein.

23. AGREEMENT BINDING

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective personal representatives, executors, administrators, successors and assigns.

24. INDEPENDENT LEGAL ADVICE

The Employee acknowledges that he has read and understands the Agreement and acknowledges that he has had the opportunity to obtain independent legal advice regarding the terms of the Agreement and their legal consequences.

25.       SURVIVAL

In the event this Agreement terminates for any reason, Sections 7, 8, 9, 10, 11, 13, 15 and 19 hereof shall survive to the extent necessary to give full effect to their terms.

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IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto as of the date first set forth above.

SIGNED, SEALED & DELIVERED

Witness	John Long
	WORKSTREAM INC.
	By:
	Name: Michael Mullarkey
	Title:  Chairman

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EX-10.7

Exhibit 10.7

EMPLOYMENT AGREEMENT

           THIS EMPLOYMENT AGREEMENT is made as of the 13th day of August, 2010

BETWEEN:

DAVID KENNEDY,

101 Spencer Road

Washington Crossing, PA 18977

(hereinafter referred to as the "Employee")

AND:

WORKSTREAM INC.,

 a corporation incorporated under the laws of  Canada

(hereinafter referred to as the "Employer")

WHEREAS:

The Employer wishes to employ the Employee and the Employee wishes to serve the Employer upon the terms and subject to the conditions herein contained.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties hereto, intending to be legally bound, covenant and agree as follows:

1. DEFINITIONS

In this Agreement, unless the context otherwise specifies or requires, the following terms shall have the following meanings:

1.1 "Agreement," "hereto," "herein," "hereof," "hereunder" and similar expressions refer to this Agreement and not to any particular section or any particular portion of this Agreement and includes all schedules attached to this Agreement;

1.2 "Court" shall mean a Court of competent jurisdiction;

1.3 "Parties" shall mean the parties to this Agreement and "Party" shall mean one of the parties to this Agreement.

2. EMPLOYMENT

2.1 The Employer agrees to employ the Employee, and the Employee agrees to act, as Chief Operating Officer of the Employer, or in such other position as the Employer and the Employee may from time to time agree, upon the terms and subject to the conditions set out in this Agreement.

2.2 The Employee specifically undertakes and agrees with the Employer that he shall be responsible for the following:

2.2.1 for fulfilling the title and role of the Chief Operating Officer of the Employer, and for fulfilling the duties and responsibilities typical of a Chief Operating Officer; and

2.2.2 such other duties and responsibilities as may be reasonably required, as determined by the Board of Directors of the Employer.

2.3 The Employee may perform such duties and responsibilities from a home office located in Washington Crossing, Pennsylvania; provided, however, that he shall be required to be present at the Company’s principal office from time to time as circumstances require or as the Board of Directors shall reasonably request.

3. TERM

3.1 The initial term of this Agreement shall be a period of three (3) years from the date hereof (the “Initial Term”).  Unless written notice is given by either party at least one hundred twenty (120) days before the end of the Initial Term or any one (1) year extension thereof (each, a “Renewal Term”) that it wishes this Agreement to terminate at the end of the Initial Term or relevant Renewal Term, as the case may be, this Agreement will be automatically extended by successive one year Renewal Terms.  Any references herein to the “Term” shall include both the Initial Term and any and all Renewal Terms.

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4.  REMUNERATION

4.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by all parties to this Agreement, pay and grant the following remuneration to the Employee:

4.1.1 Base Salary.  The Employee shall be entitled to receive an initial base salary of not less than $125,000 per year.  Such base salary shall be reviewed from year to year and may be adjusted in the sole discretion of the Board of Directors of the Employer (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”).

4.1.2 Annual Bonus.  In addition to the base salary specified in Section 4.1.1 and any other bonus set forth under this Section 4.1, the Employee shall be entitled each fiscal year (including the fiscal year ending May 31, 2011) to a performance bonus of up to 100%of his then current base salary based on the achievement of certain targets for each fiscal year to be mutually agreed upon by the Employer and Employee.  For the purpose of clarity,  the Employee shall be entitled to a prorated performance bonus for the period beginning on the date of this Agreement and ending on the last day of the Company’s current fiscal year.   The amount of such prorated bonus, i f earned, will be equal to the amount of the bonus earned multiplied by a fraction, the numerator of which shall be the number of days between the execution of this Agreement and the end of the fiscal year and the denominator of which shall be 365.  Any bonus earned for a particular fiscal year of the Employer will be paid to the Employee within 45 days after the end of such fiscal year and will be payable in cash unless the Board or Compensation Committee determines, in its sole discretion, to pay up to, but not more than, 50% of such bonus in fully vested Restricted Stock Units in the Employer.

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4.13 Restricted Stock Units and Options.  In addition to the base salary and bonus described in Sections 4.1.1 and 4.1.2 above, upon commencement of his employment under this Agreement, the Employer shall grant to the Employee 10,174,399 Restricted Stock Units in the Employer (the “RSUs”) and options to purchase 5,087,200 shares of the Employer’s common shares at a price of $.01977 per share (the “Options”), each under and subject to the terms of the Employer’s Amended and Restated 2002 Stock Option Plan.  The RSUs and Options shall vest in equal quarterly installments beginning on the three (3) month anniversary of the date of the grant (which shall be the date of this Agreement), such that one-twelfth (1/12) of the RSUs and Options vest on the three month anniversary of the date of grant and one-twelfth ( 1/12) of the RSUs and Options vest on each subsequent three-month anniversary date until all such RSUs and Options have vested.  Upon separation for any reason, Employee will be entitled to any RSUs and Options then vested.  In the event of a Change of Control (as hereinafter defined), all of the Employee’s RSUs and Options then outstanding shall vest and become immediately exercisable in full.  For purposes of this Agreement, “Change of Control” shall mean (a) a merger or consolidation of the Employer into or with, or any sale, transfer, exchange, conveyance or other disposition of the Employer’s capital stock to, any other person or persons who are not affiliates of the Employer in a single transaction or a series of related transactions, in which the stockholders of the Employer immediately prior to such related transaction or first of such series of transactions, directly or indirectly possess less than fifty percent (50%) of the Employer’s issu ed and outstanding voting capital stock immediately after such related transaction or series of such transactions; or (b) a single transaction or series of transactions pursuant to which a person or persons who are not affiliates of the Employer acquire all or substantially all of the Employer’s assets.  The Employer may withhold from any RSU grant or payment the amount necessary to satisfy any federal, state, local or other withholding tax requirements relating to such RSU grant or payment.  In connection therewith,

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the Employer may withhold or receive Common Shares or other property and to make cash payments in respect thereof in satisfaction of the Employee’s tax obligations, and such tax obligations may be satisfied, in whole or in part, by reducing a portion of the Common Shares to be received in connection with any such award or payment in an amount equal to the minimum amount required to be withheld.

5. BENEFITS

5.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by both parties to this Agreement, pay and grant the following benefits to the Employee:

5.1.1 Vacation.  The Employee shall be entitled to vacation time of four (4) weeks each calendar year.  Such vacation time shall be used at times mutually agreeable to the Employee and the Employer.  The Employee acknowledges that unused vacation time may not be carried forward except in accordance with standard Employer policy.

5.1.2 Other Benefits.  The Employee shall be entitled to participate in all benefit programs that may be generally provided by the Employer from time to time to its executive officers.  The Employer shall pay for family coverage premiums for the Employee for health and dental (if any) insurance offered by the Employer. The Employer shall pay for the Employee’s Life Insurance, STD/LTD premiums, or similar benefit plans or programs that may then be generally offered from time to time to the Employer’s officers.

5.1.3 Expenses.  Employer shall reimburse the Employee for all reasonable and necessary business expenses, including but not limited to travel and cellular phone expenses, upon the presentation to the Employer of appropriate written documentation and receipts.

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6. ATTENTION TO DUTIES

The Employee shall devote his whole working time and attention to the Employer during the Term of this Agreement and will not engage in any other business capacity or activity which, in the sole opinion of the Employer acting reasonably, would hinder or interfere with the performance of the duties of the Employee.  The employer and Employee acknowledge that the Employee is a principal of Yardley Capital Advisors, LLC (“Yardley”) and will continue his involvement with Yardley during the Term, provided that such involvement will not interfere with the Employee’s performance of his obligations hereunder.

7. CONFIDENTIALITY

The parties acknowledge that in carrying out his duties under this Agreement, the Employee will have access to and become entrusted with confidential information regarding the business plans and operations of the Employer, computer systems and technology, unique methodology and other proprietary information.  The Employee acknowledges that the right to maintain such detailed confidential information constitutes a proprietary right, which the Employer is entitled to protect.  Accordingly, the Employee shall not, during the Term of this Agreement, or at any time thereafter, disclose any of such detailed confidential information or trade secrets of the Employer to any person or persons, firm, association or corporation, nor shall the Employee use the same for any purpose, in either case, except on behalf of the Employ er.  Notwithstanding the foregoing, the obligations of the Employee in this Section 7 shall not apply to confidential information (i) which at the date hereof or thereafter becomes a matter of public knowledge without breach by the Employee of this Agreement; (ii) which is obtained by the Employee from a person, firm, or entity (other than the Employer or an affiliate of the Employer) under circumstances permitting its use or disclosure to others; or (iii) which is required to be disclosed pursuant to any applicable law or court order.

8. OWNERSHIP OF INVENTIONS

8.1 The Employee shall promptly communicate and disclose to the Employer all inventions, improvements, modifications, discoveries, designs, formulae, methods and processes made, discovered or conceived by the Employee either alone or jointly with others, during the period of his employment with the Employer, providing the same relate to or are capable of being used by the corporation or any affiliate thereof in the normal course of their businesses.

8.2 The Employee acknowledges and declares that all inventions, improvements, modifications, discoveries, designs, formulae,

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methods, processes, as are described in section 8.1 hereof, and all patents and patent applications relating thereto are the property of the Employer and hereby assigns to the Employer all of the right, title and interest of the Employee in any such inventions, improvements, modifications, discoveries, designs, formulae, methods and processes, and in any patents or patent applications relating thereto.  The Employee shall, at the Employer’s expense, execute all instruments and documents and do all such further acts and things as may be necessary or desirable, in the Employer's opinion to carry out the provisions of this section.

9.  TERMINATION

9.1 The Parties understand and agree that employment pursuant to this Agreement may be terminated during the Term in the following manner in the specified circumstances:

9.1.1 by the Employee without “good reason” (as defined below) on the giving of not less than thirty (30) days prior written notice to the Employer, which the Employer may waive, in whole or in part;

9.1.2 by the Employee for “good reason” on the giving of not less than thirty (30) days prior written notice to the Employer, if the Employer has not reasonably cured the event giving rise to the good reason by the end of such notice period.  For purposes of this Agreement, “good reason” shall mean, absent the Employee’s prior written consent: (i) the Employer’s failure to timely provide the Employee with the salary and bonuses as set forth in Section 4 hereof or to provide benefits to the Employee in accordance with Section 5 hereof; (ii) a material breach by the Employer of this Agreement; (iii) the assignment to the Employee of duties or responsibilities that are materially inconsistent with the Employee’s position with the Employer or a material and significant diminution by the Employer in the Employee’s title, responsibilities, authority or reporting stru cture; or (iv) failure of the Employer to ensure that any successor or assign of the Employer agrees in writing to be bound by the terms of this Agreement.  If the Employee terminates his employment for good reason, he shall be entitled to the severance payments, benefits

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and pro rated bonus payment to which he may be entitled as set forth in Section 9.1.3 hereof;

9.1.3 by the Employer in its absolute discretion without “cause” (as defined below) upon not less than thirty (30) days prior written notice to the Employee, in which case the Employer shall pay the Employee (a) severance equal to his then current salary for a period of six (6) months following the date of termination, (b) the benefits provided for in Section 5.1.2 for a period ending on the earlier of six (6) months after the effective date of termination or the date on which the Employee obtains employment pursuant to which he receives comparable benefits to those provided hereunder, and (c) a prorated bonus for the year in which the termination occurred (based on the ratio of the number of days in such year the Employee was employed by the Employer to 365) based upon actual results for the full year as provided pursuant to Section 4.1.2, payable at the time the bonus for such year would have otherwise b een paid.  The severance is to be payable in accordance with the Company’s normal payroll practice following the effective date of his termination of employment.  In no event shall the Employee be required to seek other employment or take any other action in order to mitigate the amounts payable to the Employee under this Section 9.1 and, unless specifically provided hereunder, such amounts shall not be reduced whether or not the Employee obtains employment following termination of his employment hereunder;

9.1.4 by the Employer for “cause,” effective immediately upon written notice to the Employee of such cause.  The Parties agree that for the purposes of this Agreement, “cause” shall mean the following, as reasonably determined by the Employer in good faith:

9.1.4.1 any material breach of the provisions of this Agreement or of an established written policy of the Employer after Employer has provided written notice to Employee and a

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ten (10) day period to cure such breach, during which time the Employee failed to cure such breach;

9.1.4.2 any intentional or grossly negligent disclosure of any confidential information, as described in section 7 hereof, by the Employee;

9.1.4.3 in carrying out his duties hereunder, the Employee (i) has been grossly negligent, or (ii) has committed willful gross misconduct, the result of which is injurious to the Employer;

9.1.4.4 personal conduct on the Employee’s part which is of such a serious and substantial nature that, as reasonably determined in good faith in the sole discretion of the Employer, it would materially injure the reputation, operations or financial condition of the Employer;

9.1.4.5 misconduct involving fraud, dishonesty, or illegality with respect to the Employer; or

9.1.4.6 being convicted of a felony or crime of moral turpitude.

9.2 The Parties understand and agree that the giving of notice or the payment of termination pay, and severance pay, as required by the Employer to the Employee on termination shall not prevent the Employer from alleging cause for the termination.

9.3 The Employee authorizes the Employer to deduct from any payment any amounts properly owed to the Employer by the Employee by reason of advances, loans or in recommence for damages to or loss of the Employer's property and equipment, save only that this provision shall be applied so as not to conflict with any applicable law or legislation.

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10. RESULTS OF TERMINATION

10.1 If this Agreement is terminated by the Employee without good reason or by the Employer for cause, as described in Sections 9.1.1 and 9.1.4 hereof, respectively, the Employee shall be entitled to receive his remuneration to the date of such termination and reimbursement of expenses as provided in Section 5.1.3 and any and all vacation pay and bonuses earned to date, if any, and no other amounts.

10.2 If this Agreement is terminated upon written notice as described in Sections 9.1.2, and 9.1.3 hereof, the Employer shall pay to the Employee to the end of the notice period his salary and at the end of the date terminating the notice provision, the Employer shall pay to the Employee reimbursement for expenses as provided in Section 5.1.3 and vacation pay equivalent and any other monies due under applicable United States federal or state law, as well as any and all amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3.

10.3 As a condition to the Employer’s obligation to pay any such amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3, the Employer may require the Employee to execute a Release and Settlement Agreement waiving all known or unknown claims against the Employer, in a form and substance requested by the Employer in its sole discretion.

11. NON-COMPETITION AND NON-SOLICITATION

11.1 The Employee shall not, while employed by the Employer and for six (6) months thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.1.1 engage or participate, directly or indirectly, in any business activity competitive with any Line of Business of the Employer at the time the employment is terminated.  For purposes of this Agreement, the term “Line of Business” means any product of the Employer which generates or has generated 15% or more of the Employer’s revenues during the one (1) year period prior to the effective date of termination; or

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11.1.2 become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any portion of the business of any person, firm, corporation, association or other entity where such business is competitive with any Line of Business as defined in Section 11.1.1; provided, however, that notwithstanding the foregoing, the Employee may own not more than five percent (5%) of the outstanding securities of a company whose securities are publicly traded.

11.2 The Employee shall not, while employed by the Employer and for two (2) years thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.2.1 solicit, call on or transact or engage in any direct or direct business activity, for a purpose competitive with the Business, with any (i) customer with whom the Employer or its affiliates shall have dealt at any time preceding the termination of the Employee’s employment, or (ii) independent contractor or supplier with which the Employer or its affiliates shall have dealt at any time during the one (1) year period preceding the termination of the Employee’s employment; or

11.2.2 influence or attempt to influence any then current or prospective supplier, customer or independent contractor of the Employer or its affiliates to terminate or modify any written or oral agreement or business relationship with the Employer or such affiliate; or

11.2.3 influence or attempt to influence any person either (i) to terminate or modify an employment, consulting or other arrangement with the Employer or its affiliates, or (ii) to employ or retain, or arrange to have any other person or entity employ or retain, any person who is then or has been employed or retained by the Employer or its affiliates as an employee or consultant of the Employer at any time during the one (1) year period immediately preceding the termination of the Employee’s employment.

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11.3 The Employee acknowledges that he has carefully read and considered the provisions of this Section 11.  The Employee acknowledges that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the Business, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the payment by the Employer of the compensation set forth herein to justify such restrictions, which restrictions the Employee does not believe would prevent him from earning a living in businesses that are not competitive with the Business and without otherwise violating the restrictions set forth herein.

12. MEDIATION/ARBITRATION

12.1 Should any dispute or disagreement of any kind arise at any time: (a) regarding the rights and liabilities of the Parties hereof or with respect to the interpretation, validity, construction, meaning, performance, effect or application of this Agreement, as amended from time to time; or (b) between the Employer and the Employee, the Parties agree that good faith negotiations shall take place between the Employer and the Employee.  If such good faith negotiations have not resolved the dispute or disagreement within a reasonable period of time, either Party may request mediation between the Parties, or either Party may refer the dispute or disagreement directly to arbitration without going to mediation.

12.2 The mediator shall be agreed upon by the both Parties.  In the event that the Parties are unable to agree upon the mediator, the dispute or disagreement shall be referred to arbitration in accordance with this Section.

12.3 All discussions before the mediator shall be non-binding, confidential and without prejudice to the position of either Party.  The Parties agree that if the mediation process does not result in a satisfactory solution of the dispute or disagreement after the lesser of either: (a) ten (10) hours of mediation, or (b) thirty (30) days from the commencement of the mediation, then either Party may refer the dispute or disagreement to arbitration pursuant to the provisions of the American Arbitration Association's National

12

Rules for the Resolution of Employment Disputes in effect at the time of the arbitration demand, in accordance with the following:

12.3.1 the reference to arbitration shall be to one (1) arbitrator.

12.3.2 any such arbitration shall be held in the city of Orlando, Florida.  The arbitration shall be completely private.  The arbitrator shall fix the appropriate procedures which may include discovery, an oral hearing(s) and any other procedures the arbitrator deems appropriate.  The issue or issues to be decided by the arbitrator shall be defined in an arbitration agreement filed on consent by the aggrieved Party.  In the event the Parties to the arbitration shall be unable to agree upon the issue or issues to be decided by the arbitrator in any arbitration pursuant to this paragraph, the arbitrator shall have jurisdiction to determine the issue or issues to be so decided.  The Parties shall do all such acts and things as are necessary to enable the arbitrator to make a proper finding respecting the matters in issue.  The arbitrator may order interest on any award and the arbitrator may award costs, including attorneys’ fees, to either Party, provided that such award is permitted by the applicable law governing the underlying claim.  In the absence of any award of costs, each of the Parties shall bear their own costs, including attorneys’ fees, of any arbitration pursuant to this paragraph and one-half of the cost of the arbitrator.  The arbitrator shall be strictly bound by applicable legal principles and the general nature of this Agreement in rendering his or her decision.

12.3.3 The Parties agree that good faith negotiations, mediation and arbitration shall all be without recourse to the Courts.  The award of the arbitrator shall be final and binding, except that either Party may appeal an arbitration award to the Courts on a question of law.  Judgment upon the award rendered by the arbitrator may be entered in any Court having jurisdiction.

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13. RIGHT TO INJUNCTIVE RELIEF

As a violation by the Employee of the provisions of Sections 7, 8 and 11 hereof could cause irreparable injury to the Employer and there is no adequate remedy at law for such violation, the Employer shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin the Employee in a court of equity from violating such provisions.  The provisions of Sections 7, 8 and 11 hereof shall survive the termination of this Agreement.

14. ASSIGNMENT OF RIGHTS

The rights and obligations which accrue to the Employer under this Agreement shall automatically inure to the benefit of and be binding on its successors and assigns, whether by operation of law or otherwise. The rights of the Employee under this Agreement are not assignable or transferable in any manner, except that any accrued salary or bonus, vested options or other benefits shall be provided to the Employee’s heirs, beneficiaries or estate, or trustee under any trust set up by and for Employee.

15. INDEMNIFICATION

The Employer agrees to maintain reasonably sufficient liability insurance and to fully indemnify and defend the Employee, during and after the Term, against all claims, liabilities, costs, attorneys’ fees, settlement payments and damages against the employee arising from the Employee’s good faith actions taken in the performance of the Employee’s duties as provided in the By-Laws of the Employer.

16. CURRENCY

All dollar amounts referred to in this Agreement shall be denominated in United States funds.

17. AMENDMENT OF AGREEMENT

This Agreement may be altered or amended at any time only by the mutual consent in writing of the Parties hereto.

18. TIME OF ESSENCE

Time shall be of the essence hereof.

19. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to the principles of conflicts of laws of any jurisdiction.

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20. HEADINGS

The headings appearing throughout this Agreement are inserted for convenience only and form no part of the Agreement.

21. SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision hereof and any such invalid or unenforceable provision will be deemed to be severable.

22. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings and discussions, whether oral or written, and there are no other warranties, agreements or representations between the parties except as expressly set forth herein.

23. AGREEMENT BINDING

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective personal representatives, executors, administrators, successors and assigns.

24. INDEPENDENT LEGAL ADVICE

The Employee acknowledges that he has read and understands the Agreement and acknowledges that he has had the opportunity to obtain independent legal advice regarding the terms of the Agreement and their legal consequences.

25. SURVIVAL

In the event this Agreement terminates for any reason, Sections 7, 8, 9, 10, 11, 13, 15 and 19 hereof shall survive to the extent necessary to give full effect to their terms.

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IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto as of the date first set forth above.

SIGNED, SEALED & DELIVERED

Witness	David Kennedy
	WORKSTREAM INC.
	By:
	Name:	Michael Mullarkey
	Title:	Chairman

PHILADELPHIA\5686382\1  120037.000

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EX-10.8

Exhibit 10.8

EMPLOYMENT AGREEMENT

           THIS EMPLOYMENT AGREEMENT is made as of the 13th day of August, 2010

BETWEEN:

EZRA SCHNEIER,

13 Lower Hilltop Road

Yardley PA 19067

(hereinafter referred to as the "Employee")

AND:

WORKSTREAM INC.,

a corporation incorporated under the laws of  Canada

(hereinafter referred to as the "Employer")

WHEREAS:

The Employer wishes to employ the Employee and the Employee wishes to serve the Employer upon the terms and subject to the conditions herein contained.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties hereto, intending to be legally bound, covenant and agree as follows:

1. DEFINITIONS

In this Agreement, unless the context otherwise specifies or requires, the following terms shall have the following meanings:

1.1 "Agreement," "hereto," "herein," "hereof," "hereunder" and similar expressions refer to this Agreement and not to any particular section or any particular portion of this Agreement and includes all schedules attached to this Agreement;

1.2 "Court" shall mean a Court of competent jurisdiction;

1.3 "Parties" shall mean the parties to this Agreement and "Party" shall mean one of the parties to this Agreement.

2. EMPLOYMENT

2.1 The Employer agrees to employ the Employee, and the Employee agrees to act, as Corporate Development Officer of the Employer, or in such other position as the Employer and the Employee may from time to time agree, upon the terms and subject to the conditions set out in this Agreement.

2.2 The Employee specifically undertakes and agrees with the Employer that he shall be responsible for the following:

2.2.1 for fulfilling the title and role of the Corporate Development Officer of the Employer, and for fulfilling the duties and responsibilities typical of a Corporate Development Officer; and

2.2.2 such other duties and responsibilities as may be reasonably required, as determined by the Board of Directors of the Employer.

2.3 The Employee may perform such duties and responsibilities from a home office located in Yardley, Pennsylvania, provided, however, that he shall be required to be present at the Company’s principal office from time to time as circumstances require or as the Board of Directors shall reasonably request.

3. TERM

3.1 The initial term of this Agreement shall be a period of three (3) years from the date hereof (the “Initial Term”).  Unless written notice is given by either party at least one hundred twenty (120) days before the end of the Initial Term or any one (1) year extension thereof (each, a “Renewal Term”) that it wishes this Agreement to terminate at the end of the Initial Term or relevant Renewal Term, as the case may be, this Agreement will be automatically extended by successive one year Renewal Terms.  Any references herein to the “Term” shall include both the Initial Term and any and all Renewal Terms.

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4.  REMUNERATION

4.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by all parties to this Agreement, pay and grant the following remuneration to the Employee:

4.1.1 Base Salary.  The Employee shall be entitled to receive an initial base salary of not less than $125,000 per year.  Such base salary shall be reviewed from year to year and may be adjusted in the sole discretion of the Board of Directors of the Employer (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”).

4.1.2 Annual Bonus.  In addition to the base salary specified in Section 4.1.1 and any other bonus set forth under this Section 4.1, the Employee shall be entitled each fiscal year (including the fiscal year ending May 31, 2011) to a performance bonus of up to 100%of his then current base salary based on the achievement of certain targets for each fiscal year to be mutually agreed upon by the Employer and Employee.  For the purpose of clarity,  the Employee shall be entitled to a prorated performance bonus for the period beginning on the date of this Agreement and ending on the last day of the Company’s current fiscal year.   The amount of such prorated bonus, i f earned, will be equal to the amount of the bonus earned multiplied by a fraction, the numerator of which shall be the number of days between the execution of this Agreement and the end of the fiscal year and the denominator of which shall be 365.  Any bonus earned for a particular fiscal year of the Employer will be paid to the Employee within 45 days after the end of such fiscal year and will be payable in cash unless the Board or Compensation Committee determines, in its sole discretion, to pay up to, but not more than, 50% of such bonus in fully vested Restricted Stock Units in the Employer.

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4.1.3 Restricted Stock Units and Options.  In addition to the base salary and bonus described in Sections 4.1.1 and 4.1.2 above, upon commencement of his employment under this Agreement, the Employer shall grant to the Employee 10,174,399 Restricted Stock Units in the Employer (the “RSUs”) and options to purchase 5,087,200 shares of the Employer’s common shares at a price of $.01977 per share (the “Options”), each under and subject to the terms of the Employer’s Amended and Restated 2002 Stock Option Plan.  The RSUs and Options shall vest in equal quarterly installments beginning on the three (3) month anniversary of the date of the grant (which shall be the date of this Agreement), such that one-twelfth (1/12) of the RSUs and Options vest on the three month anniversary of the date of grant and one-twelfth ( 1/12) of the RSUs and Options vest on each subsequent three-month anniversary date until all such RSUs and Options have vested.  Upon separation for any reason, Employee will be entitled to any RSUs and Options then vested.  In the event of a Change of Control (as hereinafter defined), all of the Employee’s RSUs and Options then outstanding shall vest and become immediately exercisable in full.  For purposes of this Agreement, “Change of Control” shall mean (a) a merger or consolidation of the Employer into or with, or any sale, transfer, exchange, conveyance or other disposition of the Employer’s capital stock to, any other person or persons who are not affiliates of the Employer in a single transaction or a series of related transactions, in which the stockholders of the Employer immediately prior to such related transaction or first of such series of transactions, directly or indirectly possess less than fifty percent (50%) of the Employer’s issu ed and outstanding voting capital stock immediately after such related transaction or series of such transactions; or (b) a single transaction or series of transactions pursuant to which a person or persons who are not affiliates of the Employer acquire all or substantially all of the Employer’s assets.  The Employer may withhold from any RSU grant or payment the amount necessary to satisfy any federal, state, local or other withholding tax requirements relating to such RSU grant or payment.  In connection therewith,

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the Employer may withhold or receive Common Shares or other property and to make cash payments in respect thereof in satisfaction of the Employee’s tax obligations, and such tax obligations may be satisfied, in whole or in part, by reducing a portion of the Common Shares to be received in connection with any such award or payment in an amount equal to the minimum amount required to be withheld.

5. BENEFITS

5.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by both parties to this Agreement, pay and grant the following benefits to the Employee:

5.1.1 Vacation.  The Employee shall be entitled to vacation time of four (4) weeks each calendar year.  Such vacation time shall be used at times mutually agreeable to the Employee and the Employer.  The Employee acknowledges that unused vacation time may not be carried forward except in accordance with standard Employer policy.

5.1.2 Other Benefits.  The Employee shall be entitled to participate in all benefit programs that may be generally provided by the Employer from time to time to its executive officers.  The Employer shall pay for family coverage premiums for the Employee for health and dental (if any) insurance offered by the Employer. The Employer shall pay for the Employee’s Life Insurance, STD/LTD premiums, or similar benefit plans or programs that may then be generally offered from time to time to the Employer’s officers.

5.1.3 Expenses.  Employer shall reimburse the Employee for all reasonable and necessary business expenses, including but not limited to travel and cellular phone expenses, upon the presentation to the Employer of appropriate written documentation and receipts.

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6. ATTENTION TO DUTIES

The Employee shall devote his whole working time and attention to the Employer during the Term of this Agreement and will not engage in any other business capacity or activity which, in the sole opinion of the Employer acting reasonably, would hinder or interfere with the performance of the duties of the Employee.  The employer and Employee acknowledge that the Employee is a principal of Yardley Capital Advisors, LLC (“Yardley”) and will continue his involvement with Yardley during the Term, provided that such involvement will not interfere with the Employee’s performance of his obligations hereunder.

7. CONFIDENTIALITY

The parties acknowledge that in carrying out his duties under this Agreement, the Employee will have access to and become entrusted with confidential information regarding the business plans and operations of the Employer, computer systems and technology, unique methodology and other proprietary information.  The Employee acknowledges that the right to maintain such detailed confidential information constitutes a proprietary right, which the Employer is entitled to protect.  Accordingly, the Employee shall not, during the Term of this Agreement, or at any time thereafter, disclose any of such detailed confidential information or trade secrets of the Employer to any person or persons, firm, association or corporation, nor shall the Employee use the same for any purpose, in either case, except on behalf of the Employ er.  Notwithstanding the foregoing, the obligations of the Employee in this Section 7 shall not apply to confidential information (i) which at the date hereof or thereafter becomes a matter of public knowledge without breach by the Employee of this Agreement; (ii) which is obtained by the Employee from a person, firm, or entity (other than the Employer or an affiliate of the Employer) under circumstances permitting its use or disclosure to others; or (iii) which is required to be disclosed pursuant to any applicable law or court order.

8. OWNERSHIP OF INVENTIONS

8.1 The Employee shall promptly communicate and disclose to the Employer all inventions, improvements, modifications, discoveries, designs, formulae, methods and processes made, discovered or conceived by the Employee either alone or jointly with others, during the period of his employment with the Employer, providing the same relate to or are capable of being used by the corporation or any affiliate thereof in the normal course of their businesses.

8.2 The Employee acknowledges and declares that all inventions, improvements, modifications, discoveries, designs, formulae,

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methods, processes, as are described in section 8.1 hereof, and all patents and patent applications relating thereto are the property of the Employer and hereby assigns to the Employer all of the right, title and interest of the Employee in any such inventions, improvements, modifications, discoveries, designs, formulae, methods and processes, and in any patents or patent applications relating thereto.  The Employee shall, at the Employer’s expense, execute all instruments and documents and do all such further acts and things as may be necessary or desirable, in the Employer's opinion to carry out the provisions of this section.

9.  TERMINATION

9.1 The Parties understand and agree that employment pursuant to this Agreement may be terminated during the Term in the following manner in the specified circumstances:

9.1.1 by the Employee without “good reason” (as defined below) on the giving of not less than thirty (30) days prior written notice to the Employer, which the Employer may waive, in whole or in part;

9.1.2 by the Employee for “good reason” on the giving of not less than thirty (30) days prior written notice to the Employer, if the Employer has not reasonably cured the event giving rise to the good reason by the end of such notice period.  For purposes of this Agreement, “good reason” shall mean, absent the Employee’s prior written consent: (i) the Employer’s failure to timely provide the Employee with the salary and bonuses as set forth in Section 4 hereof or to provide benefits to the Employee in accordance with Section 5 hereof; (ii) a material breach by the Employer of this Agreement; (iii) the assignment to the Employee of duties or responsibilities that are materially inconsistent with the Employee’s position with the Employer or a material and significant diminution by the Employer in the Employee’s title, responsibilities, authority or reporting stru cture; or (iv) failure of the Employer to ensure that any successor or assign of the Employer agrees in writing to be bound by the terms of this Agreement.  If the Employee terminates his employment for good reason, he shall be entitled to the severance payments, benefits

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and pro rated bonus payment to which he may be entitled as set forth in Section 9.1.3 hereof;

9.1.3 by the Employer in its absolute discretion without “cause” (as defined below) upon not less than thirty (30) days prior written notice to the Employee, in which case the Employer shall pay the Employee (a) severance equal to his then current salary for a period of six (6) months following the date of termination, (b) the benefits provided for in Section 5.1.2 for a period ending on the earlier of six (6) months after the effective date of termination or the date on which the Employee obtains employment pursuant to which he receives comparable benefits to those provided hereunder, and (c) a prorated bonus for the year in which the termination occurred (based on the ratio of the number of days in such year the Employee was employed by the Employer to 365) based upon actual results for the full year as provided pursuant to Section 4.1.2, payable at the time the bonus for such year would have otherwise b een paid.  The severance is to be payable in accordance with the Company’s normal payroll practice following the effective date of his termination of employment.  In no event shall the Employee be required to seek other employment or take any other action in order to mitigate the amounts payable to the Employee under this Section 9.1 and, unless specifically provided hereunder, such amounts shall not be reduced whether or not the Employee obtains employment following termination of his employment hereunder;

9.1.4 by the Employer for “cause,” effective immediately upon written notice to the Employee of such cause.  The Parties agree that for the purposes of this Agreement, “cause” shall mean the following, as reasonably determined by the Employer in good faith:

9.1.4.1 any material breach of the provisions of this Agreement or of an established written policy of the Employer after Employer has provided written notice to Employee and a

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ten (10) day period to cure such breach, during which time the Employee failed to cure such breach;

9.1.4.2 any intentional or grossly negligent disclosure of any confidential information, as described in section 7 hereof, by the Employee;

9.1.4.3 in carrying out his duties hereunder, the Employee (i) has been grossly negligent, or (ii) has committed willful gross misconduct, the result of which is injurious to the Employer;

9.1.4.4 personal conduct on the Employee’s part which is of such a serious and substantial nature that, as reasonably determined in good faith in the sole discretion of the Employer, it would materially injure the reputation, operations or financial condition of the Employer;

9.1.4.5 misconduct involving fraud, dishonesty, or illegality with respect to the Employer; or

9.1.4.6 being convicted of a felony or crime of moral turpitude.

9.2 The Parties understand and agree that the giving of notice or the payment of termination pay, and severance pay, as required by the Employer to the Employee on termination shall not prevent the Employer from alleging cause for the termination.

9.3 The Employee authorizes the Employer to deduct from any payment any amounts properly owed to the Employer by the Employee by reason of advances, loans or in recommence for damages to or loss of the Employer's property and equipment, save only that this provision shall be applied so as not to conflict with any applicable law or legislation.

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10. RESULTS OF TERMINATION

10.1 If this Agreement is terminated by the Employee without good reason or by the Employer for cause, as described in Sections 9.1.1 and 9.1.4 hereof, respectively, the Employee shall be entitled to receive his remuneration to the date of such termination and reimbursement of expenses as provided in Section 5.1.3 and any and all vacation pay and bonuses earned to date, if any, and no other amounts.

10.2 If this Agreement is terminated upon written notice as described in Sections 9.1.2, and 9.1.3 hereof, the Employer shall pay to the Employee to the end of the notice period his salary and at the end of the date terminating the notice provision, the Employer shall pay to the Employee reimbursement for expenses as provided in Section 5.1.3 and vacation pay equivalent and any other monies due under applicable United States federal or state law, as well as any and all amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3.

10.3 As a condition to the Employer’s obligation to pay any such amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3, the Employer may require the Employee to execute a Release and Settlement Agreement waiving all known or unknown claims against the Employer, in a form and substance requested by the Employer in its sole discretion.

11. NON-COMPETITION AND NON-SOLICITATION

11.1 The Employee shall not, while employed by the Employer and for six (6) months thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.1.1 engage or participate, directly or indirectly, in any business activity competitive with any Line of Business of the Employer at the time the employment is terminated.  For purposes of this Agreement, the term “Line of Business” means any product of the Employer which generates or has generated 15% or more of the Employer’s revenues during the one (1) year period prior to the effective date of termination; or

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11.1.2 become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any portion of the business of any person, firm, corporation, association or other entity where such business is competitive with any Line of Business as defined in Section 11.1.1; provided, however, that notwithstanding the foregoing, the Employee may own not more than five percent (5%) of the outstanding securities of a company whose securities are publicly traded.

11.2 The Employee shall not, while employed by the Employer and for two (2) years thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.2.1 solicit, call on or transact or engage in any direct or direct business activity, for a purpose competitive with the Business, with any (i) customer with whom the Employer or its affiliates shall have dealt at any time preceding the termination of the Employee’s employment, or (ii) independent contractor or supplier with which the Employer or its affiliates shall have dealt at any time during the one (1) year period preceding the termination of the Employee’s employment; or

11.2.2 influence or attempt to influence any then current or prospective supplier, customer or independent contractor of the Employer or its affiliates to terminate or modify any written or oral agreement or business relationship with the Employer or such affiliate; or

11.2.3 influence or attempt to influence any person either (i) to terminate or modify an employment, consulting or other arrangement with the Employer or its affiliates, or (ii) to employ or retain, or arrange to have any other person or entity employ or retain, any person who is then or has been employed or retained by the Employer or its affiliates as an employee or consultant of the Employer at any time during the one (1) year period immediately preceding the termination of the Employee’s employment.

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11.3 The Employee acknowledges that he has carefully read and considered the provisions of this Section 11.  The Employee acknowledges that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the Business, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the payment by the Employer of the compensation set forth herein to justify such restrictions, which restrictions the Employee does not believe would prevent him from earning a living in businesses that are not competitive with the Business and without otherwise violating the restrictions set forth herein.

12. MEDIATION/ARBITRATION

12.1 Should any dispute or disagreement of any kind arise at any time: (a) regarding the rights and liabilities of the Parties hereof or with respect to the interpretation, validity, construction, meaning, performance, effect or application of this Agreement, as amended from time to time; or (b) between the Employer and the Employee, the Parties agree that good faith negotiations shall take place between the Employer and the Employee.  If such good faith negotiations have not resolved the dispute or disagreement within a reasonable period of time, either Party may request mediation between the Parties, or either Party may refer the dispute or disagreement directly to arbitration without going to mediation.

12.2 The mediator shall be agreed upon by the both Parties.  In the event that the Parties are unable to agree upon the mediator, the dispute or disagreement shall be referred to arbitration in accordance with this Section.

12.3 All discussions before the mediator shall be non-binding, confidential and without prejudice to the position of either Party.  The Parties agree that if the mediation process does not result in a satisfactory solution of the dispute or disagreement after the lesser of either: (a) ten (10) hours of mediation, or (b) thirty (30) days from the commencement of the mediation, then either Party may refer the dispute or disagreement to arbitration pursuant to the provisions of the American Arbitration Association's National

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Rules for the Resolution of Employment Disputes in effect at the time of the arbitration demand, in accordance with the following:

12.3.1 the reference to arbitration shall be to one (1) arbitrator.

12.3.2 any such arbitration shall be held in the city of Orlando, Florida.  The arbitration shall be completely private.  The arbitrator shall fix the appropriate procedures which may include discovery, an oral hearing(s) and any other procedures the arbitrator deems appropriate.  The issue or issues to be decided by the arbitrator shall be defined in an arbitration agreement filed on consent by the aggrieved Party.  In the event the Parties to the arbitration shall be unable to agree upon the issue or issues to be decided by the arbitrator in any arbitration pursuant to this paragraph, the arbitrator shall have jurisdiction to determine the issue or issues to be so decided.  The Parties shall do all such acts and things as are necessary to enable the arbitrator to make a proper finding respecting the matters in issue.  The arbitrator may order interest on any award and the arbitrator may award costs, including attorneys’ fees, to either Party, provided that such award is permitted by the applicable law governing the underlying claim.  In the absence of any award of costs, each of the Parties shall bear their own costs, including attorneys’ fees, of any arbitration pursuant to this paragraph and one-half of the cost of the arbitrator.  The arbitrator shall be strictly bound by applicable legal principles and the general nature of this Agreement in rendering his or her decision.

12.3.3 The Parties agree that good faith negotiations, mediation and arbitration shall all be without recourse to the Courts.  The award of the arbitrator shall be final and binding, except that either Party may appeal an arbitration award to the Courts on a question of law.  Judgment upon the award rendered by the arbitrator may be entered in any Court having jurisdiction.

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13. RIGHT TO INJUNCTIVE RELIEF

As a violation by the Employee of the provisions of Sections 7, 8 and 11 hereof could cause irreparable injury to the Employer and there is no adequate remedy at law for such violation, the Employer shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin the Employee in a court of equity from violating such provisions.  The provisions of Sections 7, 8 and 11 hereof shall survive the termination of this Agreement.

14. ASSIGNMENT OF RIGHTS

The rights and obligations which accrue to the Employer under this Agreement shall automatically inure to the benefit of and be binding on its successors and assigns, whether by operation of law or otherwise. The rights of the Employee under this Agreement are not assignable or transferable in any manner, except that any accrued salary or bonus, vested options or other benefits shall be provided to the Employee’s heirs, beneficiaries or estate, or trustee under any trust set up by and for Employee.

15. INDEMNIFICATION

The Employer agrees to maintain reasonably sufficient liability insurance and to fully indemnify and defend the Employee, during and after the Term, against all claims, liabilities, costs, attorneys’ fees, settlement payments and damages against the employee arising from the Employee’s good faith actions taken in the performance of the Employee’s duties as provided in the By-Laws of the Employer.

16. CURRENCY

All dollar amounts referred to in this Agreement shall be denominated in United States funds.

17. AMENDMENT OF AGREEMENT

This Agreement may be altered or amended at any time only by the mutual consent in writing of the Parties hereto.

18. TIME OF ESSENCE

Time shall be of the essence hereof.

19. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to the principles of conflicts of laws of any jurisdiction.

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20. HEADINGS

The headings appearing throughout this Agreement are inserted for convenience only and form no part of the Agreement.

21. SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision hereof and any such invalid or unenforceable provision will be deemed to be severable.

22. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings and discussions, whether oral or written, and there are no other warranties, agreements or representations between the parties except as expressly set forth herein.

23. AGREEMENT BINDING

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective personal representatives, executors, administrators, successors and assigns.

24. INDEPENDENT LEGAL ADVICE

The Employee acknowledges that he has read and understands the Agreement and acknowledges that he has had the opportunity to obtain independent legal advice regarding the terms of the Agreement and their legal consequences.

25. SURVIVAL

In the event this Agreement terminates for any reason, Sections 7, 8, 9, 10, 11, 13, 15 and 19 hereof shall survive to the extent necessary to give full effect to their terms.

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IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto as of the date first set forth above.

SIGNED, SEALED & DELIVERED

Witness	Ezra Schneier
	WORKSTREAM INC.
	By:
	Name:	Michael Mullarkey
	Title:	Chairman

PHILADELPHIA\5686384\1  120037.000

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EX-10.9

Exhibit 10.9

EMPLOYMENT AGREEMENT

           THIS EMPLOYMENT AGREEMENT is made as of the 13th day of August, 2010

BETWEEN:

MICHAEL MULLARKEY,

978 Ponte Vedra Blvd.

Ponte Vedra Beach, FL 32082

(hereinafter referred to as the "Employee")

AND:

WORKSTREAM INC.,

a corporation incorporated under the laws of  Canada

(hereinafter referred to as the "Employer")

WHEREAS:

The Employee and the Employer are parties to that certain Employment Agreement dated as of July 31, 2010 (the “Previous Employment Agreement”);

The Employee and the Employer desire to terminate the Previous Employment Agreement and enter into a new Employment Agreement on the terms set forth hereunder; and

The Employer wishes to employ the Employee initially as Executive Vice President, Sales and Marketing, and the Employee wishes to serve the Employer in such position, upon the terms and subject to the conditions herein contained.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties, the parties hereto, intending to be legally bound, covenant and agree as follows:

1. DEFINITIONS

In this Agreement, unless the context otherwise specifies or requires, the following terms shall have the following meanings:

1.1 "Agreement," "hereto," "herein," "hereof," "hereunder" and similar expressions refer to this Agreement and not to any particular section or any particular portion of this Agreement and includes all schedules attached to this Agreement;

1.2 "Court" shall mean a Court of competent jurisdiction;

1.3 "Parties" shall mean the parties to this Agreement and "Party" shall mean one of the parties to this Agreement.

2. EMPLOYMENT

2.1 The Employer agrees to employ the Employee, and the Employee agrees to act, as Executive Vice President, Sales and Marketing of the Employer, or in such other position as the Employer and the Employee may from time to time agree, upon the terms and subject to the conditions set out in this Agreement.

2.2 The Employee specifically undertakes and agrees with the Employer that he shall be responsible for the following:

2.2.1 for fulfilling the title and role of the Executive Vice President, Sales and Marketing of the Employer, and for fulfilling the duties and responsibilities typical of an Executive Vice President, Sales and Marketing; and

2.2.2 such other duties and responsibilities as may be reasonably required, as determined by the Board of Directors of the Employer.

2.3 The Employee may perform such duties and responsibilities from a home office located in Ponte Vedra Beach, Florida; provided, however, that he shall be required to be present at the Company’s principal office from time to time as circumstances require or as the Board of Directors shall reasonably request.

3. TERM

3.1 The initial term of this Agreement shall be a period of three (3) years from the date hereof (the “Initial Term”).  Unless written notice is given by either party at least one hundred twenty (120) days before the end of the Initial Term or any one (1) year

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extension thereof (each, a “Renewal Term”) that it wishes this Agreement to terminate at the end of the Initial Term or relevant Renewal Term, as the case may be, this Agreement will be automatically extended by successive one year Renewal Terms.  Any references herein to the “Term” shall include both the Initial Term and any and all Renewal Terms.

4.  REMUNERATION

4.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by all parties to this Agreement, pay and grant the following remuneration to the Employee:

4.1.1 Base Salary.  The Employee shall be entitled to receive an initial base salary of not less than $200,000 per year.  Such base salary shall be reviewed from year to year and may be adjusted in the sole discretion of the Board of Directors of the Employer (the “Board”) or the Compensation Committee of the Board (the “Compensation Committee”).

4.1.2 Commissions.  In addition to the base salary specified in Section 4.1.1, the Employee shall be entitled to receive commissions on Employer software salesmade by the Company resulting from the Employee’s and the Employee’s sales team’s efforts on terms to be agreed upon by the Employer and the Employee and to be set forth on Exhibit A hereto.  Such commissions shall be payable in accordance with the Employer’s regular commission payment schedule.

4.1.3 Restricted Stock Units and Options.  In addition to the base salary and commissions described in Sections 4.1.1 and 4.1.2 above, upon commencement of his employment under this Agreement, the Employer shall grant to the Employee 8,139,519 Restricted Stock Units in the Employer (the “RSUs”) and options to purchase 8,139,519 shares of the Employer’s Common Shares at a price of $.01977 per share (the “Options”), each under and subject to the terms of the Employer’s Amended and Restated 2002

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2002 Stock Option Plan.  The RSUs and Options shall vest in equal quarterly installments beginning on the three (3) month anniversary of the date of the grant (which shall be the date of this Agreement), such that one-twelfth (1/12) of the RSUs and Options vest on the three month anniversary of the date of grant and one-twelfth (1/12) of the RSUs and Options vest on each subsequent three-month anniversary date until all such RSUs and Options have vested; provided, however, that in the event the Employee consummates a software sale to a customer on behalf of the Employer that results in annual Software Revenue to the Employer equal to or in excess of $1,000,000, then all such RSUs and Options that have not yet vested in the fiscal year in which such software sale is consummated shall vest and become immediately exercisable in full.  Upon termination of this Agreement for any reason, the Employ ee will be entitled to any RSUs and Options then vested.  In the event of a Change of Control (as hereinafter defined), all of the Employee’s RSUs and Options then outstanding shall vest and become immediately exercisable in full.  For purposes of this Agreement, “Change of Control” shall mean (a) a merger or consolidation of the Employer into or with, or any sale, transfer, exchange, conveyance or other disposition of the Employer’s capital stock to, any other person or persons who are not affiliates of the Employer in a single transaction or a series of related transactions, in which the stockholders of the Employer immediately prior to such related transaction or first of such series of transactions, directly or indirectly possess less than fifty percent (50%) of the Employer’s issued and outstanding voting capital stock immediately after such related transaction or series of such transactions; or (b) a single transaction or series of transactions pursuant to which a person or persons who are not affiliates of the Employer acquire all or substantially all of the Employer’s assets.  The Employer may withhold from any RSU grant or payment the amount necessary to satisfy any federal, state, local or other withholding tax requirements relating to such RSU grant or payment.  In connection therewith, the Employer may withhold or receive Common Shares or other property and to make cash payments in respect thereof in satisfaction of the Employee’s tax obligations, and such tax obligations may be satisfied, in whole or in part, by reducing a portion of the Common Shares to be received in connection with any such award or payment in an amount equal to the minimum amount required to be withheld.

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4.1.4 Bonus.  In connection with his entering into this Agreement, the Employee shall receive a one-time bonus as follows: (a) $150,000 in cash payable in twelve (12) equal monthly installments beginning on the five month anniversary of the date of this Agreement; and (b) 7,587,249 fully vested and otherwise unrestricted RSUs.  The Bonus set forth in this Section 4.1.4 shall be irrevocable, and the Employee shall be entitled to, and the Employer shall pay, such bonus on the terms set forth herein even upon termination of this Agreement for any reason.

5. BENEFITS

5.1 In consideration of the Employee’s undertaking and the performance of the obligations contained in this Agreement, the Employer shall, unless otherwise agreed upon by both parties to this Agreement, pay and grant the following benefits to the Employee:

5.1.1 Vacation.  The Employee shall be entitled to vacation time of four (4) weeks each calendar year.  Such vacation time shall be used at times mutually agreeable to the Employee and the Employer.  The Employee acknowledges that unused vacation time may not be carried forward except in accordance with standard Employer policy.

5.1.2 Other Benefits.  The Employee shall be entitled to participate in all benefit programs that may be generally provided by the Employer from time to time to its executive officers.  The Employer shall pay for family coverage premiums for the Employee for health and dental (if any) insurance offered by the Employer. The Employer shall pay for the Employee’s Life Insurance, STD/LTD premiums, or similar benefit plans or programs

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that may then be generally offered from time to time to the Employer’s officers.

5.1.3 Expenses.  Employer shall reimburse the Employee for all reasonable and necessary business expenses, including but not limited to travel and cellular phone expenses, upon the presentation to the Employer of appropriate written documentation and receipts.

6. ATTENTION TO DUTIES

The Employee shall devote his whole working time and attention to the Employer during the Term of this Agreement and will not engage in any other business capacity or activity which, in the sole opinion of the Employer acting reasonably, would hinder or interfere with the performance of the duties of the Employee.

7. CONFIDENTIALITY

The parties acknowledge that in carrying out his duties under this Agreement, the Employee will have access to and become entrusted with confidential information regarding the business plans and operations of the Employer, computer systems and technology, unique methodology and other proprietary information.  The Employee acknowledges that the right to maintain such detailed confidential information constitutes a proprietary right, which the Employer is entitled to protect.  Accordingly, the Employee shall not, during the Term of this Agreement, or at any time thereafter, disclose any of such detailed confidential information or trade secrets of the Employer to any person or persons, firm, association or corporation, nor shall the Employee use the same for any purpose, in either case, except on behalf of the Employ er.  Notwithstanding the foregoing, the obligations of the Employee in this Section 7 shall not apply to confidential information (i) which at the date hereof or thereafter becomes a matter of public knowledge without breach by the Employee of this Agreement; (ii) which is obtained by the Employee from a person, firm, or entity (other than the Employer or an affiliate of the Employer) under circumstances permitting its use or disclosure to others; or (iii) which is required to be disclosed pursuant to any applicable law or court order.

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8. OWNERSHIP OF INVENTIONS

8.1 The Employee shall promptly communicate and disclose to the Employer all inventions, improvements, modifications, discoveries, designs, formulae, methods and processes made, discovered or conceived by the Employee either alone or jointly with others, during the period of his employment with the Employer, providing the same relate to or are capable of being used by the corporation or any affiliate thereof in the normal course of their businesses.

8.2 The Employee acknowledges and declares that all inventions, improvements, modifications, discoveries, designs, formulae, methods, processes, as are described in section 8.1 hereof, and all patents and patent applications relating thereto are the property of the Employer and hereby assigns to the Employer all of the right, title and interest of the Employee in any such inventions, improvements, modifications, discoveries, designs, formulae, methods and processes, and in any patents or patent applications relating thereto.  The Employee shall, at the Employer’s expense, execute all instruments and documents and do all such further acts and things as may be necessary or desirable, in the Employer's opinion to carry out the provisions of this section.

9.  TERMINATION

9.1 The Parties understand and agree that employment pursuant to this Agreement may be terminated during the Term in the following manner in the specified circumstances:

9.1.1 by the Employee without “good reason” (as defined below) on the giving of not less than thirty (30) days prior written notice to the Employer, which the Employer may waive, in whole or in part;

9.1.2 by the Employee for “good reason” on the giving of not less than thirty (30) days prior written notice to the Employer, if the Employer has not reasonably cured the event giving rise to the good reason by the end of such notice period.  For purposes of this Agreement, “good reason” shall mean, absent the Employee’s prior written consent: (i) the Employer’s failure to timely provide the Employee with the salary and bonuses as set forth in

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Section 4 hereof or to provide benefits to the Employee in accordance with Section 5 hereof; (ii) a material breach by the Employer of this Agreement; (iii) the assignment to the Employee of duties or responsibilities that are materially inconsistent with the Employee’s position with the Employer or a material and significant diminution by the Employer in the Employee’s title, responsibilities, authority or reporting structure; or (iv) failure of the Employer to ensure that any successor or assign of the Employer agrees in writing to be bound by the terms of this Agreement.  If the Employee terminates his employment for good reason, he shall be entitled to the severance payments, benefits and bonus installment payment to which he may be entitled as set forth in Section 9.1.3 hereof;

9.1.3 by the Employer in its absolute discretion without “cause” (as defined below) upon not less than thirty (30) days prior written notice to the Employee, in which case the Employer shall pay the Employee (a) severance equal to his then current salary for a period of six (6) months following the date of termination, (b) the benefits provided for in Section 5.1.2 for a period ending on the earlier of six (6) months after the effective date of termination or the date on which the Employee obtains employment pursuant to which he receives comparable benefits to those provided hereunder, (c) commissions earned pursuant to Section 4.1.2 but no yet paid, and (d) bonus installments not yet made pursuant to Section 4.1.4.  The severance is to be payable in accordance with the Employer’s normal payroll practice following the effective date of his termination of employment.  In no event s hall the Employee be required to seek other employment or take any other action in order to mitigate the amounts payable to the Employee under this Section 9.1 and, unless specifically provided hereunder, such amounts shall not be reduced whether or not the Employee obtains employment following termination of his employment hereunder;

9.1.4 by the Employer for “cause,” effective immediately upon written notice to the Employee of such cause.  The Parties

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agree that for the purposes of this Agreement, “cause” shall mean the following, as reasonably determined by the Employer in good faith:

9.1.4.1 any material breach of the provisions of this Agreement or of an established written policy of the Employer after Employer has provided written notice to Employee and a ten (10) day period to cure such breach, during which time the Employee failed to cure such breach;

9.1.4.2 any intentional or grossly negligent disclosure of any confidential information, as described in section 7 hereof, by the Employee;

9.1.4.3 in carrying out his duties hereunder, the Employee (i) has been grossly negligent, or (ii) has committed willful gross misconduct, the result of which is injurious to the Employer;

9.1.4.4 personal conduct on the Employee’s part which is of such a serious and substantial nature that, as reasonably determined in good faith in the sole discretion of the Employer, it would materially injure the reputation, operations or financial condition of the Employer;

9.1.4.5 misconduct involving fraud, dishonesty, or illegality with respect to the Employer; or

9.1.4.6 being convicted of a felony or crime of moral turpitude.

9.2 The Parties understand and agree that the giving of notice or the payment of termination pay, and severance pay, as required by the Employer to the Employee on termination shall not prevent the Employer from alleging cause for the termination.

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9.3 The Employee authorizes the Employer to deduct from any payment any amounts properly owed to the Employer by the Employee by reason of advances, loans or in recommence for damages to or loss of the Employer's property and equipment, save only that this provision shall be applied so as not to conflict with any applicable law or legislation.

10. RESULTS OF TERMINATION

10.1 If this Agreement is terminated by the Employee without good reason or by the Employer for cause, as described in Sections 9.1.1 and 9.1.4 hereof, respectively, the Employee shall be entitled to receive his remuneration to the date of such termination and reimbursement of expenses as provided in Section 5.1.3, any bonus installments not yet made under Section 4.1.4 and any and all vacation pay and commissions earned to date, if any, and no other amounts.

10.2 If this Agreement is terminated upon written notice as described in Sections 9.1.2, and 9.1.3 hereof, the Employer shall pay to the Employee to the end of the notice period his salary and at the end of the date terminating the notice provision, the Employer shall pay to the Employee reimbursement for expenses as provided in Section 5.1.3 and vacation pay equivalent and any other monies due under applicable United States federal or state law, as well as any and all amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3.

10.3 As a condition to the Employer’s obligation to pay any such amounts to which he may be entitled pursuant to sections 9.1.2 or 9.1.3, the Employer may require the Employee to execute a Release and Settlement Agreement waiving all known or unknown claims against the Employer, in a form and substance requested by the Employer in its sole discretion.

10.4 The Employee authorizes the Employer to deduct from any payment any amounts properly owed to the Employer by the Employee by reason of advances, loans or in recommence for damages to or loss of the Employer's property and equipment,

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 save only that this provision shall be applied so as not to conflict with any applicable law or legislation.

11. NON-COMPETITION AND NON-SOLICITATION

11.1 The Employee shall not, while employed by the Employer and for six (6) months thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.1.1 engage or participate, directly or indirectly, in any business activity competitive with any Line of Business of the Employer at the time the employment is terminated.  For purposes of this Agreement, the term “Line of Business” means any product of the Employer which generates or has generated 15% or more of the Employer’s revenues during the one (1) year period prior to the effective date of termination; or

11.1.2 become interested (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any portion of the business of any person, firm, corporation, association or other entity where such business is competitive with any Line of Business as defined in Section 11.1.1; provided, however, that notwithstanding the foregoing, the Employee may own not more than five percent (5%) of the outstanding securities of a company whose securities are publicly traded.

11.2 The Employee shall not, while employed by the Employer and for two (2) years thereafter, do any of the following, directly or indirectly, without the prior written consent of the Employer in its sole discretion:

11.2.1 solicit, call on or transact or engage in any direct or direct business activity, for a purpose competitive with the Business, with any (i) customer with whom the Employer or its affiliates shall have dealt at any time preceding the termination of the Employee’s employment, or (ii) independent contractor or supplier with which the Employer or its affiliates shall have dealt at any time

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during the one (1) year period preceding the termination of the Employee’s employment; or

11.2.2 influence or attempt to influence any then current or prospective supplier, customer or independent contractor of the Employer or its affiliates to terminate or modify any written or oral agreement or business relationship with the Employer or such affiliate; or

11.2.3 influence or attempt to influence any person either (i) to terminate or modify an employment, consulting or other arrangement with the Employer or its affiliates, or (ii) to employ or retain, or arrange to have any other person or entity employ or retain, any person who is then or has been employed or retained by the Employer or its affiliates as an employee or consultant of the Employer at any time during the one (1) year period immediately preceding the termination of the Employee’s employment.

11.3 The Employee acknowledges that he has carefully read and considered the provisions of this Section 11.  The Employee acknowledges that the foregoing restrictions may limit his ability to earn a livelihood in a business similar to the Business, but he nevertheless believes that he has received and will receive sufficient consideration and other benefits in connection with the payment by the Employer of the compensation set forth herein to justify such restrictions, which restrictions the Employee does not believe would prevent him from earning a living in businesses that are not competitive with the Business and without otherwise violating the restrictions set forth herein.

12. MEDIATION/ARBITRATION

12.1 Should any dispute or disagreement of any kind arise at any time: (a) regarding the rights and liabilities of the Parties hereof or with respect to the interpretation, validity, construction, meaning, performance, effect or application of this Agreement, as amended from time to time; or (b) between the Employer and the Employee, the Parties agree that good faith negotiations shall take place between the Employer and the Employee.  If such good faith negotiations have not resolved the dispute or disagreement within a reasonable period of time, either Party may request mediation between the Parties, or either Party may refer the dispute or disagreement directly to arbitration without going to mediation.

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12.2 The mediator shall be agreed upon by the both Parties.  In the event that the Parties are unable to agree upon the mediator, the dispute or disagreement shall be referred to arbitration in accordance with this Section.

12.3 All discussions before the mediator shall be non-binding, confidential and without prejudice to the position of either Party.  The Parties agree that if the mediation process does not result in a satisfactory solution of the dispute or disagreement after the lesser of either: (a) ten (10) hours of mediation, or (b) thirty (30) days from the commencement of the mediation, then either Party may refer the dispute or disagreement to arbitration pursuant to the provisions of the American Arbitration Association's National Rules for the Resolution of Employment Disputes in effect at the time of the arbitration demand, in accordance with the following:

12.3.1 the reference to arbitration shall be to one (1) arbitrator.

12.3.2 any such arbitration shall be held in the city of Orlando, Florida.  The arbitration shall be completely private.  The arbitrator shall fix the appropriate procedures which may include discovery, an oral hearing(s) and any other procedures the arbitrator deems appropriate.  The issue or issues to be decided by the arbitrator shall be defined in an arbitration agreement filed on consent by the aggrieved Party.  In the event the Parties to the arbitration shall be unable to agree upon the issue or issues to be decided by the arbitrator in any arbitration pursuant to this paragraph, the arbitrator shall have jurisdiction to determine the issue or issues to be so decided.  The Parties shall do all such acts and things as are necessary to enable the arbitrator to make a proper finding respecting the matters in issue.  The arbitrator may order interest on any award and the arbitrator may award costs, including attorneys’ fees, to either Party, provided that such award is permitted by the applicable law governing the underlying claim.  In the absence of any award of costs, each of the Parties shall bear their own costs, including attorneys’ fees, of any arbitration pursuant to this paragraph and one-half of the cost of the arbitrator.  The arbitrator shall be strictly bound by applicable legal principles and the general nature of this Agreement in rendering his or her decision.

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12.3.3 The Parties agree that good faith negotiations, mediation and arbitration shall all be without recourse to the Courts.  The award of the arbitrator shall be final and binding, except that either Party may appeal an arbitration award to the Courts on a question of law.  Judgment upon the award rendered by the arbitrator may be entered in any Court having jurisdiction.

13. RIGHT TO INJUNCTIVE RELIEF

As a violation by the Employee of the provisions of Sections 7, 8 and 11 hereof could cause irreparable injury to the Employer and there is no adequate remedy at law for such violation, the Employer shall have the right, in addition to any other remedies available to it at law or in equity, to enjoin the Employee in a court of equity from violating such provisions.  The provisions of Sections 7, 8 and 11 hereof shall survive the termination of this Agreement.

14. ASSIGNMENT OF RIGHTS

The rights and obligations which accrue to the Employer under this Agreement shall automatically inure to the benefit of and be binding on its successors and assigns, whether by operation of law or otherwise. The rights of the Employee under this Agreement are not assignable or transferable in any manner, except that any accrued salary or bonus, vested options or other benefits shall be provided to the Employee’s heirs, beneficiaries or estate, or trustee under any trust set up by and for Employee.

15. INDEMNIFICATION

The Employer agrees to maintain reasonably sufficient liability insurance and to fully indemnify and defend the Employee, during and after the Term, against all claims, liabilities, costs, attorneys’ fees, settlement payments and damages against the employee arising from the Employee’s good faith actions taken in the performance of the Employee’s duties as provided in the By-Laws of the Employer.

16. CURRENCY

All dollar amounts referred to in this Agreement shall be denominated in United States funds.

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17. AMENDMENT OF AGREEMENT

This Agreement may be altered or amended at any time only by the mutual consent in writing of the Parties hereto.

18. TIME OF ESSENCE

Time shall be of the essence hereof.

19. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without regard to the principles of conflicts of laws of any jurisdiction.

20. HEADINGS

The headings appearing throughout this Agreement are inserted for convenience only and form no part of the Agreement.

21. SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision hereof and any such invalid or unenforceable provision will be deemed to be severable.

22. WAIVER AND RELEASE; ENTIRE AGREEMENT

The Employee and Employer hereby agree that the Previous Employment Agreement is hereby terminated in its entirety and of no further force and effect, and neither party hereto has any further rights or obligations thereunder.  The Employee hereby agrees to waive any and all rights he may have under the Previous Employment Agreement, including bonuses, severance or other payments to which he may be entitled thereunder.  The Employee hereby releases the Employer for any and all claims he may have arising under or with respect to the Previous Employment Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior and contemporaneous agreements, understandings and discussions, whether oral or written, and there are no other warranties, agreements or representations between the parties except as expressly set forth herein.

23. AGREEMENT BINDING

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective personal representatives, executors, administrators, successors and assigns.

24. INDEPENDENT LEGAL ADVICE

The Employee acknowledges that he has read and understands the Agreement and acknowledges that he has had the opportunity to obtain independent legal advice regarding the terms of the Agreement and their legal consequences.

25. SURVIVAL

In the event this Agreement terminates for any reason, Sections 7, 8, 9, 10, 11, 13, 15 and 19 hereof shall survive to the extent necessary to give full effect to their terms.

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IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto as of the date first set forth above.

SIGNED, SEALED & DELIVERED

Witness	Michael Mullarkey
	WORKSTREAM INC.
	By:
	Name:
	Title:

PHILADELPHIA\5686397\7  120037.000

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EX-99.1

 News Release

For more information:

Ezra Schneier

Tel: 866-953-8800  Ext. 709

Mobile:  267-980-6096

Ezra.Schneier@workstreaminc.com

www.workstreaminc.com

Workstream Inc. Announces Major Expansion Plans

New CEO and Board of Directors Aim to Build a Stonger Human Capital Management Company

Through Growth of Existing Products and New Offerings

John Long, Former CEO of First Advantage Corporation, Takes Over as CEO

August 16, 2010….Maitland, Florida…..Workstream Inc. (NASDAQ: WSTM.OB) today announced expansion of its management, appointment of a new Board of Directors, new capital structure and additional capital for the human capital technology, software and services company. The changes are expected to result in growth of the business and the introduction of additional products as well as to set a course for possible future acquisitions. In making the announcement, the company outlined plans that are intended to allow the company to become a stronger human capital management business, expanding on the current Workstream Software as a Service (SaaS) offerings.

John Long, former CEO of First Advantage Corporation, will take over as CEO of Workstream, replacing Michael Mullarkey, the founder and current CEO, who will remain with the company. Under Long’s watch, First Advantage Corporation grew from a small division of First American Corporation (NYSE: FAF) to a stand-alone publicly traded company with over a billion dollar market cap. Workstream will maintain its current headquarters in Maitland, Florida, outside of Orlando.

Workstream offers a set of technology solutions and services to help employers meet challenging human capital issues. The offering includes software and data for recruiting, managing performance reviews, developing competencies for employees, succession planning,

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communicating with employees about benefits and managing compensation and non-cash rewards programs. A pioneer in the human capital management sector, Workstream has multi-language capabilities that serve a growing international customer base.

Commenting on the move, John Long said: “Workstream is a vibrant company with a suite of innovative human capital technology solutions. The company’s compensation management, performance management and recruiting products are best in class. In addition, the Rewards and Recognition services and 6FigureJobs career site owned by Workstream are exceptional businesses. I have been impressed with the services and look forward to putting the company on a path to growth. Recently, Workstream has expanded the services supplied to current clients and succeeded in landing contracts with new clients.”

Company Founder Michael Mullarkey added: “Workstream has a solid, loyal customer base that relies on its products to manage performance reviews and variable pay, establish individual goals and competencies and other strategic human capital functions, using technology. With John Long on board, an expanded management team and a solid capital structure, we can focus on building out the service offering by responding to our customers. Increasingly, companies are seeking to adopt more of the solutions Workstream offers to help attract and retain talent. The solutions are highly scalable and we believe bring great results to employers.”

A new Board of Directors will guide Workstream: Jeffrey Moss, Chairman of the Board; Biju Kulathakal; Denis Sutton; and CEO John Long. Chairman Jeffrey Moss said: “I am delighted to be a part of this newly re-energized company and participate in its future initiatives. We are fortunate to be in a growing market with an established set of solutions that are in high demand. And we have a management team in place who have successfully executed on growing quality businesses in the human capital sector during their careers.”

Members of the new Board of Directors will be:

§ Jeffrey Moss – Chairman of the Board – Chief of Enterprise Growth, Educational Testing Service (ETS), Princeton, New Jersey and Chicago, Illinois;

§ Biju Kulathakal – Chairman and CEO of Trading Block Holdings, Inc. – a financial services holding company, based in Chicago, Illinois;

§ Denis E. Sutton – Senior Vice President, Human Resources, MTS Allstream – Enterprise Solutions Division, Winnipeg, Manitoba, Canada

§ John Long – CEO, Workstream Inc.

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Joining Long as part of the management team are David Kennedy, Chief Operating Officer, and Ezra Schneier, Corporate Development Officer. Both worked with Long in similar roles at First Advantage Corporation.

Workstream also announced that it had completed a capital restructuring pursuant to which the holders of its senior secured debt exchanged such debt (totaling approximately $22.4 million) for a total of 682,852,374 common shares in Workstream. In addition, certain of such note holders as well as members of the company’s new management team agreed to invest in the company by purchasing an aggregate $1.25 Million of Workstream’s common shares in a private placement. Following the exchange of the senior secured debt and the issuance of shares in the private placement, Workstream’s former debt holders and new management team will own approximately 92% of the company’s issued and outstanding common shares. As part of the capital restructuring, one of the note holders agreed to loan the company $750,000 pursuant to which the company issued such note holder a new senior secured note. The company expects to use the proceeds for working capital purposes and to expand the business.

“This new capital structure allows us to focus on growth and innovation without being burdened by a heavy debt load,” Long said. With a new capital structure, the company intends to strengthen the business and seek strategic acquisitions to build out the suite of available services and solutions. Long said: “Our strategy is to be the preferred vendor for our clients and bring them the solutions they need to manage a variety of human capital requirements. In this regard, we will look to acquire companies that have top-shelf services and technology that are complementary to the Workstream solutions.”

“The goal for Workstream is to become a larger, more diversified human capital technology and service provider,” Long said. “This is a market that we believe is under-served today. At the same time, the needs of businesses to improve the way they manage HR functions continues to expand. Managing human capital continues to shift from an administrative function to a strategic area for employers, with huge potential returns. We expect Workstream to be right in the middle of helping to enable that shift.”

Continued Long: “We will achieve success by listening to our customers and serving the needs of existing and new clients in the months ahead. Workstream has a combination of great products, state of the art technology, skilled management and staff with a culture that emphasizes customer service. We believe it is a great platform for future growth.”

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A Current Report on Form 8-K will be filed with the SEC containing the material terms of the transactions described above and the agreements delivered in connection with such transactions.

- end -

About Workstream

Workstream is a human capital management technology and services company dedicated to assisting employers manage recruiting, variable compensation, performance and other critical HR functions. Workstream provides enterprise and mid-market talent management solutions and services that help companies manage the entire employee lifecycle - from recruitment to retirement. Solutions are offered on a monthly subscription basis, under a Software as a Service (SaaS) model. www.workstreaminc.com

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations or beliefs of Workstream's management and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: inability to grow our client base and revenue because of the number of competitors and the variety of sources of competition we face; client attrition; inability to identify or complete the acquisition of quality target businesses; inability to integrate acquired bus inesses; inability to offer services that are superior and cost effective when compared to the services being offered by our competitors; inability to further identify, develop and achieve success for new products, services and technologies; increased competition and its effect on pricing, spending, third-party relationships and revenues; as well as the inability to enter into successful strategic relationships and other risks detailed from time to time in filings with the Securities and Exchange Commission, including but not limited to those set forth under “Risk Factors” in Workstream’s annual report on Form 10-K. The forward-looking statements herein reflect the company's expectations as at the date of this press release and are subject to change after this date.

Workstream Inc.

485 N. Keller Road, Suite 500

Maitland, FL 32751

Tel: 866-953-8800

For more information: Ezra Schneier

Ezra.Schneier@workstreaminc.com

Tel: 866-953-8800 Ext. 709

Mobile: 267-980-6095

www.workstreaminc.com

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