Employment AGREEMENT

THIS AGREEMENT is made as of the 3rd day of December 2006.

BETWEEN:
Deepak Gupta
of the City of Pleasanton, CA 94566
(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 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
“President” shall mean the President of Enterprise Software for the Company;

       

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

       

   
1.4
"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
President or in such other employment as the Employer and the Employee may from
time to time agree in writing and the Employee agrees to serve the Employer 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 President of the Employer; and

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

.

--------------------------------------------------------------------------------

3.
TERM

 

   
3.1
The Initial Term of this Agreement shall be a period of two (2) years from the
date hereof. Unless written notice is given by either party at least ninety (90)
days before the end of the Initial Term or any one (1) year extension thereof
(each, a “Renewal Term”), that they wish this Agreement to terminate at the end
of the Initial or respective Renewal Term, whichever may apply, 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. If Employer provides notice of termination pursuant to this
Section 3.1, Employee shall be shall be entitled to the payments set forth in
section 10.1.3 hereof, to be provided within thirty (30) days after his
termination.

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 a salary, not less than
$300,000.00 (U.S.) per year Employee’s base annual compensation shall be subject
to review annually for possible adjustment by the Company (by action of the
Compensation Committee of the Board of Directors) and shall be agreed to by the
Company and the Employee.

     

  4.1.2
Bonus. In addition to the base salary specified in section 4.1.1 the Employee
shall be entitled to an aggregate annual bonus of $200,000.00 (U.S.) based on
certain targets being achieved. The Parties will mutually agree to these
targets. Achievement of targets will be assessed on a quarterly basis, and any
bonus earned for a particular quarter, as reasonably determined by the Employer,
will be paid to the Employee within 30 days after the close of the quarter

     

 
4.1.3
Stock Options. In addition to the base salary outlined in section 4.1.1 on the
first date of employment, the Employee shall be granted a stock option to
purchase 1,000,000 shares of common stock of the Employer (the “Option Shares”)
at a price that is the closing price on the NASDAQ market on the date of the
option grant. In addition, the Employee will be granted at least 250,000
additional options on the first anniversary of the initial option grant. These
options shall vest one third annually over a three (3) year period, beginning on
the first anniversary of the date of the option grant.

     

  4.1.4 
Restricted Stock Units: In addition to the base salary outlined in section 4.1.1
on the first date of employment, the Employee shall be granted 250,000
Restricted Stock Units (the “RSU’s”). These RSU’s shall vest one-third over a
three (3) year period, beginning on the first anniversary of the date of the
grant. Upon separation for any reason, Employee will be entitled to any
Restricted Stock then vested.

 
2

--------------------------------------------------------------------------------

 
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 all 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 three (3) weeks
each calendar year. Such vacation time shall be used at times mutually agreeable
to the Employee and the Employer.

     
5.1.2
Other Benefits. The Employee shall be entitled to participate in all benefit
programs provided by Employer to its executives effective upon the Employee’s
start date. The Employer shall pay for single coverage premiums for the Employee
and his family for health and dental (if any) insurance offered by the Employer.
The Employer shall pay for the Employee’s STD/LTD premiums.

     
5.1.3
Expenses. Employer shall pay Employee $500 per month toward a car allowance. In
addition, the Employer shall reimburse the Employee for all reasonable and
necessary business expenses, including but not limited to 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 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, however,
the Employee shall be permitted, to the extent that such activities do not
materially interfere with the performance of his duties and responsibilities
hereunder, to (i) manage his personal and family financial affairs, (ii) serve
on civic, not-for-profit or charitable industry boards and advisory committees,
(iii) on the board of United Security Applications and (iv) serve on the Boards
of Directors or similar governing bodies of one other business entities
(provided, that the business of such entities is not competitive with the
business of the Company, as determined and approved by the Board of Directors,
whose determination and approval shall not be unreasonably withheld).

 

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 for up to 3 years 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 Employer.
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; or (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.

 
 
3

--------------------------------------------------------------------------------

 
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.
NON-COMPETITION

 
The Employee shall not, without prior written consent of the Employer for the
period of his employment hereunder or for a period of one (1) year following the
termination of this Agreement or any renewal hereof, for any reason be it for
cause or not, either alone or in conjunction with any individual, firm,
corporation, association or any entity, except for the Employer, whether as
principal, agent, shareholder, employee or in any other capacity whatsoever,
perform the duties of or provide the services as are described in section 2.2
hereof in a business which competes with the Employer, within any geographical
location where the Employer has carried on business or expended time and
personnel and financial resources. Furthermore, the Employee also agrees that
upon the termination of his employment he will not solicit to hire or encourage
to leave their employ, any of the Employer's other employees for a period of one
(1) year following termination of this Agreement. Notwithstanding the foregoing,
the Employee shall not be precluded from competing with the business of the
Employer in the event his employment is terminated by the Employee for good
reason or by the Employer other than for cause, unless the Employer provides the
applicable compensation and benefits set out in section 10.1.3 hereof, in which
case, the Employee shall be precluded from competing as described in this
section 9 until such time as such compensation and benefits are terminated.

 
10.
TERMINATION

     
10.1
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:

     
10.1.1
by the Employee without good reason (as defined below), on the giving of not
less than one (1) month prior written notice to the Employer, which the Employer
may waive, in whole or in part;

     
10.1.2
by the Employee for good reason on the giving of not less than one (1) month
prior written notice to the Employer, if the Employer has not cured the event
giving rise to 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, bonus and equity as set forth in section 4.1 hereof or to provide
benefits to the Employee in accordance with section 5.1 hereof; (ii) a material
breach by the Employer of this Agreement or any other agreement with the
Employee; (iii) a material diminution by the Employer in the Employee’s title,
responsibilities, authority, reporting structure; (iv) Employer requiring
Employee to change his office location to a place which is more than 50 miles
from his current residence (current residence address is 1844 Zenato Place,
Pleasanton, CA 94566); or (v) 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 payments set forth in section 10.1.3 hereof, to be
provided within thirty (30) days after his termination;

 
4

--------------------------------------------------------------------------------

 
 
 
10.1.3
by the Employer in its absolute discretion without cause upon not less than one
(1) month prior written notice to the Employee, on giving the Employee a payment
equal to (i) twelve (12) months salary at the rate in effect on the Employee’s
termination date; (ii) the value of twelve (12) months of benefits and
entitlements the Employee was enjoying as of his termination date (including but
not limited to the cost to Employee to pay for twelve (12) months of COBRA
payments for health and dental (if any) family insurance coverage); (iii) all
salary, benefits and entitlements to which the Employee is entitled in
accordance with any relevant statute or law; and (iv) if the employment of the
Employee is terminated during the first 12 months of the employment then the
vesting schedule of the Employee’s unvested outstanding stock options and RSU
awards will accelerate by 12 months, and he will be permitted to exercise vested
options for 9 months following termination of employment; if the employment of
the Employee is terminated after the first 12 months of the employment then the
vesting schedule of the Employee’s unvested outstanding stock options and RSU
awards will accelerate by 9 months, and he will be permitted to exercise vested
options for 9 months following termination of employment. The payment
representing this aggregate amount shall be paid within thirty (30) days from
notice provided herein;

 

     
10.1.4
by the Employer for 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, and that the Employee shall be terminated immediately
upon written notice for such cause:

   
10.1.4.1
any material breach of the provisions of this Agreement or of an established
written policy of the Employer after Employer provided written notice to
Employee and 30 day opportunity to cure during which time Employee failed to
cure;

 

   
10.1.4.2
any intentional or grossly negligent disclosure of any confidential information
as described in section 7 hereof, by the Employee;

 
5

--------------------------------------------------------------------------------

 

 

   
10.1.4.3
in carrying out his duties hereunder, the Employee; (i) has been grossly
negligent, or (ii) has committed willful gross misconduct;

   
10.1.4.4
Employee’s conviction of a felony or other criminal act, as reasonably
determined in good faith in the sole discretion of the Employer, it would
materially injure the reputation of the Employer if the Employee is retained as
an Employee;

 
 

     
10.2
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.

 
11.
RESULTS OF TERMINATION

     
11.1
If this Agreement is terminated for cause, as described in section 10.1.4
hereof, the Employee shall be entitled to receive his remuneration to the date
of such termination for cause, including any and all vacation pay and bonuses
earned to date.

     
11.2
If this Agreement is terminated upon written notice as described in paragraphs
3.1, 10.1.1, 10.1.2, and 10.1.3 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
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 10.1.2 or 10.1.3.

12.
MEDIATION/ARBITRATION

     
12.1
Should any dispute or disagreement of any kind arise at any time; (i) 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 (ii) 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 Rules for the Resolution of
Employment Disputes in effect at the time of the arbitration demand, in
accordance with the following:

 
6

--------------------------------------------------------------------------------

 

      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 Employer agrees to reimburse the
Employee for reasonable travel and expenses for all arbitration related travel.
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/her/its 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.

13.
RIGHT TO INJUNCTIVE RELIEF

  As a violation by the Employee of the provisions of paragraphs 7 and 9 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 paragraphs 7
and 9 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. CHANGE OF CONTROL

 
The Employer agrees that should there be a change in control of the Employer
during the Employee’s employment with the Employer or within 90 days after
Employee’s employment is terminated without cause, all unvested stock options,
RSU’s and restricted stock held by the Employee shall become immediately vested
and exercisable in full and the Employee will be permitted to exercise vested
options and RSU’s for 12 months following change of control. The Employer
further agrees If, within 90 days before or 18 months following a change of
control, the Employee’s employment is terminated for any reason except for cause
or the Employee resigns for good reason as defined in section 10.1.2, the
Employee shall receive payment equal to (i) twelve (12) months salary and 100%
of his target bonus for the year of termination at the rate in effect on the
Employee’s termination date; (ii) the value of twelve (12) months of benefits
and entitlements the Employee was enjoying as of his termination date (including
but not limited to the cost to Employee to pay for twelve (12) months of COBRA
payments for health and dental (if any) family insurance coverage); and (iii)
all salary, benefits and entitlements to which the Employee is entitled in
accordance with any relevant statute or law. The payment representing this
aggregate amount shall be paid within thirty (30) days from notice provided
herein. For the purposes of this section, “change in control” shall be defined
as such term is defined the Employer’s 2002 Amended and Restated Stock Option
Plan.

 
7

--------------------------------------------------------------------------------

 

16. RESIDENCE

   

17. INDEMNIFICATION

 
The Employer agrees to fully indemnify and defend the Employee against all
claims, liabilities, costs, attorneys’ fees, settlement payments and damages
relating to or arising from any threatened or actual legal action against the
Employee by the company with which the Employee was last employed before the
date hereof, in relation in any manner to section 7 of the Employee’s prior
employment agreement with such company. Employer shall also maintain in force at
least $5,000,000 of directors and officers liability insurance with Employee as
a named insured.

 
18.
CURRENCY

  All dollar amounts referred to in this Agreement are in United States funds.

 
19.
AMENDMENT OF AGREEMENT

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

 
20.
TIME OF ESSENCE

  Time shall be of the essence hereof.

 
21.
GOVERNING LAW

  This Agreement shall be governed by and construed in accordance with the laws
of the Province of Ontario.

 
22.
HEADINGS

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

 
23.
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.

 
24.
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.

 
8

--------------------------------------------------------------------------------

 
25.
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.

 
26.
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.

 

27.
SURVIVAL 

 
In the event this Agreement terminates for any reason, sections 3.1, 7, 9,
10.1.2, 10.1.3, 11, 15 and 17 hereof shall survive to the extent necessary to
give full effect to their terms.

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

SIGNED, SEALED & DELIVERED
 

            /s/ Deepak Gupta

--------------------------------------------------------------------------------

Witness  

--------------------------------------------------------------------------------

Deepak Gupta                     WORKSTREAM INC.             Per: /s/ Michael
Mullarkey      

--------------------------------------------------------------------------------

Michael Mullarkey
    Title: Chairman & Chief Executive Officer

 
 
9

--------------------------------------------------------------------------------