EXHIBIT 10.1

TRANSACTION AGREEMENT

This TRANSACTION AGREEMENT (the “Agreement”), dated as of July 25, 2007, by and
among Workstream Inc., a corporation existing pursuant to the Canada Business
Corporations Act, with offices located at 495 March Road, Ottawa, Ontario,
Canada K2K-3G1 (the “Company”), and the investors listed on the Schedule of
Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).

RECITALS

A. The Company and each Buyer is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the 1933 Act.

B. The Company has authorized the sale of special warrants, in the form attached
hereto as Exhibit A (the “Special Warrants”), which Special Warrants shall be
convertible into the Company’s common shares, no par value (the “Common
Shares”), at the Conversion Rate (as defined in the Special Warrants) in
accordance with the terms thereof.

C.  Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) a Special Warrant with the
Conversion Amount (as defined in the Special Warrants) set forth opposite such
Buyer’s name in column (3) on the Schedule of Buyers convertible into Common
Shares (as converted, collectively, the “Conversion Shares”) and (ii) a warrant
to acquire up to that number of Common Shares set forth opposite such Buyer’s
name in column (4) on the Schedule of Buyers (the “Warrants”), in the form
attached hereto as Exhibit B (as exercised, collectively, the “Warrant Shares”).

D. At the Closing, the parties hereto shall execute and deliver a Registration
Rights Agreement, in the form attached hereto as Exhibit C (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to provide certain
registration rights with respect to the Registrable Securities (as defined in
the Registration Rights Agreement), under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

E. The Special Warrants, the Conversion Shares, the Warrants and the Warrant
Shares are collectively referred to herein as the “Securities.”

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 Buyer hereby
agree as follows:
 

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1.
PURCHASE AND SALE OF SPECIAL WARRANTS AND WARRANTS.

(a) Special Warrants and Warrants. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, the Company shall issue and
sell to each Buyer, and each Buyer severally, but not jointly, agrees to
purchase from the Company on the Closing Date (as defined below), a Special
Warrant for the Conversion Amount as is set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers, along with the Warrants to acquire that
number of Warrant Shares as is set forth opposite such Buyer’s name in column
(4), on the Schedule of Buyers.

(b) Closing. The closing (the “Closing”) of the purchase of the Special Warrants
and the Warrants by the Buyers shall occur at the offices of Greenberg Traurig,
LLP, 77 W. Wacker Drive, Suite 2400, Chicago, Illinois 60601. The date and time
of the Closing (the “Closing Date”) shall be 10:00 a.m., Chicago Time, on the
first (1st) Business Day on which the conditions to the Closing set forth in
Sections 6 and 7 below are satisfied or waived (or such later date as is
mutually agreed to by the Company and each Buyer). As used herein “Business Day”
means any day other than a Saturday, Sunday or other day on which commercial
banks in Chicago, Illinois are authorized or required by law to remain closed.

(c) Purchase Price. The aggregate purchase price for the Special Warrants and
the Warrants to be purchased by each Buyer (the “Purchase Price”) shall be the
amount set forth opposite such Buyer’s name in column (5) on the Schedule of
Buyers. Each Buyer shall pay its respective Purchase Price for the Special
Warrant and related Warrants to be purchased by such Buyer at the Closing.

(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its
respective Purchase Price to the Company for the Special Warrants and the
Warrants to be issued and sold to such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions and (ii) the Company shall issue and deliver to each Buyer (A) a
Special Warrant for the Conversion Amount as is set forth opposite such Buyer’s
name in column (3) of the Schedule of Buyers) and (B) a Warrant pursuant to
which such Buyer shall have the right to acquire such number of Warrant Shares
as is set forth opposite such Buyer’s name in column (4) of the Schedule of
Buyers, in all cases duly executed on behalf of the Company and registered in
the name of such Buyer or its designee.
 
2.
BUYER’S REPRESENTATIONS AND WARRANTIES.

Each Buyer represents and warrants to the Company with respect to only itself
that:
 
(a) Organization; Authority. Such Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder. For purposes of this Agreement, “Transaction
Documents” means this Agreement, the Special Warrants, the Warrants, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as
defined in Section 5(b)), and each of the other agreements and instruments
entered into by the parties hereto in connection with the transactions
contemplated hereby and thereby.
 
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(b) No Public Sale or Distribution. Such Buyer is (i) acquiring the Special
Warrants and the Warrants, (ii) upon conversion of the Special Warrants will
acquire the Conversion Shares issuable upon conversion thereof, and (iii) upon
exercise of the Warrants will acquire the Warrant Shares issuable upon exercise
thereof, in each case, for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree, or make
any representation or warranty (except as set forth in Section 4(o)), to hold
any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption under the 1933 Act. Such Buyer is not a
broker-dealer registered, or required to be registered, with the SEC under the
1934 Act. Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.

(c) Accredited Investor Status. Such Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.

(d) Reliance on Exemptions. Such Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and such Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to acquire the
Securities.
 
(e) Information. Such Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
requested by such Buyer. Such Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby. Such
Buyer understands that its investment in the Securities involves a high degree
of risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
 
(f) No Governmental Review. Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
 
(g) Transfer or Resale. Such Buyer understands that except as provided in the
Registration Rights Agreement and Section 4(h) hereof: (i) the Securities have
not been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel to such Buyer, in a form reasonably acceptable to
the Company, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such Buyer provides the Company with reasonable
assurance that such Securities can be sold, assigned or transferred pursuant to
Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule
thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person (as defined in Section 3(s))
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.
 
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(h) Validity; Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered on behalf of such
Buyer and shall constitute the legal, valid and binding obligations of such
Buyer enforceable against such Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

(i) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the Registration Rights Agreement and the consummation by such
Buyer of the transactions contemplated hereby and thereby will not (i) result in
a violation of the organizational documents of such Buyer or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws) applicable to such Buyer, except in the case of clauses (ii)
and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of such Buyer to perform its obligations
hereunder.

(j) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.
 
(k) Certain Trading Activities. Such Buyer has not directly or indirectly, nor
has any Person acting on behalf of or pursuant to any understanding with such
Buyer, engaged in any transactions in the securities of the Company (including
without limitation, any Short Sales involving the Company’s securities) since
the time that the Buyer was first contacted regarding the investment in the
Company contemplated herein. “Short Sales” include, without limitation, all
“short sales” as defined in Rule 200 promulgated under Regulation SHO under the
1934 Act (“Regulation SHO”) and all types of direct and indirect stock pledges,
forward sale contracts, options, puts, calls, swaps and similar arrangements
(including on a total return basis), and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers. Such Buyer does not as of
the date hereof, and will not immediately following the Closing, own 10% or more
of the Company’s issued and outstanding Common Shares (calculated based on the
assumption that all Equivalents (as defined below) owned by such Buyer, whether
or not presently exercisable or convertible, have been fully exercised or
converted (as the case may be) but taking into account any limitations on
exercise or conversion (including “blockers”) contained therein).
 
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(l) General Solicitation. No Buyer is purchasing the Securities 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.
 
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:
 
(a) Organization and Qualification. The Company and each Subsidiary are entities
duly organized and validly existing and in good standing under the laws of the
jurisdiction in which they are formed, and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted and as presently proposed to be conducted. Each of the Company
and each of the Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, “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 the other Transaction Documents or (iii) the authority or ability
of the Company to perform its obligations under the Transaction Documents (as
defined below). Other than the Subsidiaries, there is no Person in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest. For purposes of this Agreement, Workstream USA, Inc., a
Delaware corporation, Paula Allen Holdings, Inc., a Florida corporation, The
Omni Partners, Inc., a Florida corporation, and 6FigureJobs.com, Inc., a
Delaware corporation, are collectively referred to herein as the “Subsidiaries”
and individually as a “Subsidiary.”
 
(b) Authorization; Enforcement; Validity. The Company has the requisite power
and authority to enter into and perform its obligations under the Transaction
Documents and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of this Agreement and the other Transaction
Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Special Warrants and the reservation for issuance and issuance
of the Conversion Shares issuable upon conversion of the Special Warrants, the
issuance of the Warrants and the reservation for issuance and issuance of the
Warrant Shares issuable upon exercise of the Warrants, have been duly authorized
by the Company’s Board of Directors, and (other than the filing with the SEC of
one or more Registration Statements in accordance with the requirements of the
Registration Rights Agreement and any other filings as may be required by any
state securities agencies) no further filing, consent or authorization is
required by the Company, its Board of Directors or its stockholders. This
Agreement and the other Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state
securities law.
 
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(c) Issuance of Securities. The issuance of the Special Warrants and the
Warrants has been duly authorized and, upon issuance in accordance with the
terms of the Transaction Documents, the Special Warrants and the Warrants shall
be validly issued, fully paid and non-assessable and free from all taxes, liens,
charges and other encumbrances with respect to the issue thereof. As of the
Closing, the Company shall have reserved from its duly authorized capital stock
not less than 110% of the sum of (i) the maximum number of Conversion Shares
issuable upon conversion of the Special Warrants (assuming for purposes hereof
that the Special Warrants are convertible at the initial Conversion Price (as
defined in the Special Warrants) and without taking into account any limitations
on the conversion of the Special Warrants set forth therein) and (ii) the
maximum number of Warrant Shares issuable upon exercise of the Warrants (without
regard to any limitations on the exercise of the Warrants set forth therein).
Upon conversion in accordance with the Special Warrants or exercise in
accordance with the Warrants (as the case may be), the Conversion Shares and the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof, with the holders being entitled
to all rights accorded to a holder of Common Shares. Subject to the accuracy of
the representations and warranties of the Buyers in this Agreement, the offer
and issuance by the Company of the Securities is exempt from registration under
the 1933 Act.

(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Special Warrants, the Warrants, the Conversion Shares and Warrant Shares and
the reservation for issuance of the Conversion Shares and Warrant Shares) will
not (i) result in a violation of the Articles of Incorporation (as defined in
Section 3(r)) or other organizational documents of the Company or any of the
Subsidiaries, any capital stock of the Company or any of the Subsidiaries or
Bylaws (as defined in Section 3(r)) of the Company or bylaws of any of the
Subsidiaries, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of the
Subsidiaries is a party, except to the extent such conflict, default or
termination right would not reasonably be expected to have a Material Adverse
Effect, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of The Nasdaq Capital Market and the Boston Stock
Exchange (together, the “Principal Market”) and including all applicable
Canadian laws, rules and regulations) applicable to the Company or any of the
Subsidiaries or by which any property or asset of the Company or any of the
Subsidiaries is bound or affected except, in the case of clause (ii) or (iii)
above, to the extent such violations that could not reasonably be expected to
have a Material Adverse Effect.
 
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(e) Consents. The Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency or any regulatory or self-regulatory agency or any other Person in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents, in each case, in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date, and the
Company is not aware of any facts or circumstances which might prevent the
Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence. The Company is not in violation of
the requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the
Common Shares in the foreseeable future.

(f) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of an
arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company or any of the Subsidiaries, (ii) an “affiliate” (as
defined in Rule 144) of the Company or any of the Subsidiaries or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the Common Shares (as
defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the “1934 Act”)). The Company further acknowledges that no Buyer is
acting as a financial advisor or fiduciary of the Company or any of the
Subsidiaries (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Buyer’s purchase of the Securities. The Company
further represents to each Buyer that the Company’s decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

(g) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor
any of the Subsidiaries or affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or brokers’ commissions (other than for
persons engaged by any Buyer or its investment advisor) relating to or arising
out of the transactions contemplated hereby. Neither the Company nor any of the
Subsidiaries has engaged any placement agent or other agent in connection with
the sale of the Securities.

(h) No Integrated Offering. None of the Company, the Subsidiaries or any of
their affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company, the Subsidiaries, their affiliates nor any Person acting on their
behalf will take any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
the offering of any of the Securities to be integrated with other offerings.
 
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(i) Dilutive Effect. The Company understands and acknowledges that the number of
Conversion Shares and Warrant Shares will increase in certain circumstances. The
Company further acknowledges that its obligation to issue the Conversion Shares
upon conversion of the Special Warrants and the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement, the Special Warrants and the
Warrants is, absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.

(j) Application of Takeover Protections; Rights Agreement. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or other
organizational document or the laws of the jurisdiction of its incorporation or
otherwise which is or could become applicable to any Buyer as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and any Buyer’s ownership of the
Securities. Neither the Company nor any Subsidiary has adopted a stockholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Shares or a change in control of the Company or any of the
Subsidiaries.

(k) SEC Documents; Financial Statements. During the two (2) years prior to the
date hereof, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 1934 Act (all of the foregoing filed prior
to the date hereof and all exhibits included therein and financial statements,
notes and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the “SEC Documents”). The Company has delivered
to the Buyers or their respective representatives true, correct and complete
copies of each of the SEC Documents not available on the EDGAR system. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents 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). No other information provided by or on behalf of the Company to the
Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(e) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein not misleading, in the light
of the circumstance under which they are or were made.
 
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(l) Absence of Certain Changes. Since the date of the Company’s most recent
audited financial statements contained in a Form 10-K, there has been no
material adverse change and no material adverse development in the business,
assets, liabilities, properties, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any of the
Subsidiaries. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of the
Subsidiaries has (i) declared or paid any dividends, (ii) sold any material
assets outside of the ordinary course of business or (iii) made any material
capital expenditures. Neither the Company nor any of the Subsidiaries has taken
any steps to seek protection pursuant to any law or statute relating to
bankruptcy, insolvency, reorganization, liquidation or winding up, nor does the
Company or any Subsidiary have any knowledge or reason to believe that any of
their respective creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company and the Subsidiaries, individually and on a consolidated basis,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby to occur at the Closing, will not be Insolvent (as defined
below). For purposes of this Section 3(l), “Insolvent” means, (I) with respect
to the Company and the Subsidiaries, on a consolidated basis, (i) the present
fair saleable value of the Company’s and the Subsidiaries’ assets is less than
the amount required to pay the Company’s and the Subsidiaries’ total
Indebtedness (as defined in Section 3(s)), (ii) the Company and the Subsidiaries
are unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (iii)
the Company and the Subsidiaries intend to incur or believe that they will incur
debts that would be beyond their ability to pay as such debts mature; and (II)
with respect to the Company and each Subsidiary, individually, (i) the present
fair saleable value of the Company’s or any of the Subsidiaries’ assets is less
than the amount required to pay each of their respective total Indebtedness,
(ii) the Company or any of the Subsidiaries are unable to pay their respective
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (iii) the Company or any of the
Subsidiaries intend to incur or believe that they will incur debts that would be
beyond their respective ability to pay as such debts mature. Neither the Company
nor any of the Subsidiaries has engaged in business or in any transaction, and
is not about to engage in business or in any transaction, for which the
Company’s or such Subsidiary’s remaining assets constitute unreasonably small
capital.

(m) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is reasonably
foreseeable to exist or occur with respect to the Company, any of the
Subsidiaries or their respective business, properties, liabilities, prospects,
operations (including results thereof) or condition (financial or otherwise),
that (i) would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Shares and which
has not been publicly announced or (ii) could have a Material Adverse Effect.
 
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(n) Conduct of Business; Regulatory Permits. Neither the Company nor any of the
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, any certificate of designation, preferences or rights of any
other outstanding series of preferred stock of the Company or any of the
Subsidiaries or Bylaws or their organizational charter, certificate of formation
or certificate of incorporation or bylaws, respectively. Neither the Company nor
any of the Subsidiaries is in violation of any judgment, decree or order or any
statute, ordinance, rule or regulation applicable to the Company or any of the
Subsidiaries, and neither the Company nor any of the Subsidiaries will conduct
its business in violation of any of the foregoing, except in all cases for
possible violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances that
could reasonably lead to delisting or suspension of the Common Shares by the
Principal Market in the foreseeable future. Except as set forth on Schedule
3(n), since January 1, 2006, (i) the Common Shares have been designated for
quotation on the Principal Market, (ii) trading in the Common Shares has not
been suspended by the SEC or the Principal Market and (iii) the Company has
received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Shares from the Principal
Market. The Company and each of the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

(o) Foreign Corrupt Practices. Neither the Company nor any of the Subsidiaries
nor any director, officer, agent, employee or other Person acting on behalf of
the Company or any of the Subsidiaries has, in the course of its actions for, or
on behalf of, the Company or any of the Subsidiaries (i) used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

(p) Sarbanes-Oxley Act. The Company and each Subsidiary is in compliance in all
material respects with all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and all applicable rules and
regulations promulgated by the SEC thereunder that are effective as of the date
hereof.
 
(q) Transactions With Affiliates. Other than as set forth on Schedule 3(q), none
of the officers, directors or employees of the Company or any of the
Subsidiaries is presently a party to any transaction with the Company or any of
the Subsidiaries (other than for ordinary course services as employees, officers
or directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any
such officer, director or employee or, to the knowledge of the Company or any of
the Subsidiaries, any corporation, partnership, trust or other entity in which
any such officer, director, or employee has a substantial interest or is an
officer, director, trustee or partner.
 
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(r) Equity Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) unlimited Common Shares, of which as of the date
hereof, 51,963,081, including 323,625 shares held in treasury, are issued and
outstanding and 11,434,044 shares are reserved for issuance pursuant to
securities (other than the Special Warrants and the Warrants) exercisable or
exchangeable for, or convertible into, Common Shares, and (ii) unlimited shares
of preferred stock, none of which, as of the date hereof, are issued and
outstanding. All of such outstanding shares are duly authorized and have been,
or upon issuance will be, validly issued and are fully paid and nonassessable.
9,810,971 shares of the Company’s issued and outstanding Common Shares on the
date hereof are as of the date hereof owned by Persons who are “affiliates” (as
defined in Rule 405 of the 1933 Act and calculated based on the assumption that
only officers, directors and holders of at least 10% of the Company’s issued and
outstanding Common Shares are “affiliates” without conceding that any such
Persons are “affiliates” for purposes of federal securities laws) of the Company
or any of the Subsidiaries. To the Company’s knowledge, as of the date hereof no
Person (other than the Persons identified in the Schedule 13G/A filed with the
SEC on February 14, 2007 by Janus Capital Management LLC) owns 10% or more of
the Company’s issued and outstanding Common Shares (calculated based on the
assumption that all Equivalents, whether or not presently exercisable or
convertible, have been fully exercised or converted (as the case may be) but
taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is a
10% stockholder for purposes of federal securities laws). Except as disclosed in
Schedule 3(r): (i) none of the Company’s or any Subsidiary’s capital stock is
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of the Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of the Subsidiaries is or may become
bound to issue additional capital stock of the Company or any of the
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock of the
Company or any of the Subsidiaries; (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing Indebtedness (as defined in Section 3(s)) of
the Company or any of the Subsidiaries or by which the Company or any of the
Subsidiaries is or may become bound; (iv) there are no financing statements
securing obligations in any material amounts, either individually or in the
aggregate, filed in connection with the Company or any of the Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of the
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there
are no outstanding securities or instruments of the Company or any of the
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of the Subsidiaries is or may become bound to redeem a security of the
Company or any of the Subsidiaries; (vii) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities; (viii) neither the Company nor any Subsidiary has
any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; and (ix) neither the Company nor any of the
Subsidiaries have any liabilities or obligations required to be disclosed in the
SEC Documents which are not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or the Subsidiaries’ respective
businesses and which, individually or in the aggregate, do not or could not have
a Material Adverse Effect. The Company has furnished to the Buyers true, correct
and complete copies of the Company’s Articles of Amendment, Articles of
Incorporation, as amended and as in effect on the date hereof (the “Articles of
Incorporation”), and the Company’s bylaws, as amended and as in effect on the
date hereof (the “Bylaws”), and the terms of all securities convertible into, or
exercisable or exchangeable for, Common Shares and the material rights of the
holders thereof in respect thereto.
 
(s) Indebtedness and Other Contracts. Except as disclosed on Schedule 3(s),
neither the Company nor any of the Subsidiaries (i) has any outstanding
Indebtedness (as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
“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 such assets or property has not assumed or become liable for
the payment of such 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; (y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, 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 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; and
(z) “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.
 
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(t) Absence of Litigation. Except as set forth on Schedule 3(t), there is no
action, suit, proceeding, inquiry or investigation before or by the Principal
Market, any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of the Subsidiaries, the Common Shares or any of
the Company’s or the Subsidiaries’ officers or directors which is outside of the
ordinary course of business or individually or in the aggregate material to the
Company or any of the Subsidiaries.

(u) Insurance. The Company and each of the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for, and neither the Company nor any such Subsidiary has any reason
to believe that it will be unable to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

(v) Employee Relations. Neither the Company nor any of the Subsidiaries is a
party to any collective bargaining agreement or employs any member of a union.
The Company and the Subsidiaries believe that their relations with their
employees are good. No executive officer (as defined in Rule 501(f) promulgated
under the 1933 Act) or other key employee of the Company or any of the
Subsidiaries has notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such
officer’s employment with the Company or any such Subsidiary. No executive
officer or other key employee of the Company or any of the Subsidiaries is, or
is now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or other
key employee (as the case may be) does not subject the Company or any of the
Subsidiaries to any liability with respect to any of the foregoing matters. The
Company and the Subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices and benefits, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
 
(w) Title. Except as set forth on Schedule 3(w), the Company and the
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and the Subsidiaries, in each case, free
and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of the
Subsidiaries. Any real property and facilities held under lease by the Company
or any of the Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company or any of the Subsidiaries.
 
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(x) Intellectual Property Rights. The Company and the Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (“Intellectual Property Rights”)
necessary to conduct their respective businesses as now conducted and as
presently proposed to be conducted. None of the Company’s or the Subsidiaries’
Intellectual Property Rights have expired, terminated or been abandoned, or are
expected to expire, terminate or be abandoned, within three years from the date
of this Agreement. The Company does not have any knowledge of any infringement
by the Company or any of the Subsidiaries of Intellectual Property Rights of
others. There is no claim, action or proceeding being made or brought, or to the
knowledge of the Company, being threatened, against the Company or any of the
Subsidiaries regarding their Intellectual Property Rights. The Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Company and each
of the Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights.

(y) Environmental Laws. The Company and the Subsidiaries (i) are in compliance
with all Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect. The term “Environmental Laws” means all federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(z) Subsidiary Rights. The Company or one of the Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of the
Subsidiaries as owned by the Company or such Subsidiary.
 
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(aa) Tax Status. The Company and each of the Subsidiaries (i) has timely made or
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
timely paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company and the
Subsidiaries know of no basis for any such claim. The Company is not operated in
such a manner as to qualify as a passive foreign investment company, as defined
in Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.
 
(bb) Internal Accounting and Disclosure Controls. The Company and each of the
Subsidiaries maintains a system of internal accounting controls reasonably
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset and liability accountability, (iii) access to assets or
incurrence of liabilities is permitted only in accordance with management’s
general or specific authorization and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference. The Company maintains disclosure controls and procedures (as such
term is defined in Rule 13a-14 under the 1934 Act) that are reasonably effective
in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company’s management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure. Neither
the Company nor any of the Subsidiaries has received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of the Company or any
of the Subsidiaries.

(cc) Off Balance Sheet Arrangements. There is no transaction, arrangement, or
other relationship between the Company or any of the Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise could be reasonably likely to have a Material Adverse Effect.

(dd) Investment Company Status. The Company is not, and upon consummation of the
sale of the Securities will not be, an “investment company,” an affiliate of an
“investment company,” a company controlled by an “investment company” or an
“affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.

(ee) Acknowledgement Regarding Buyers’ Trading Activity. It is understood and
acknowledged by the Company (i) that, other than as contemplated by Section 2(k)
and Section 4(o), following the public disclosure of the transactions
contemplated by the Transaction Documents, in accordance with the terms thereof,
none of the Buyers have been asked by the Company or any of the Subsidiaries to
agree, nor has any Buyer agreed with the Company or any of the Subsidiaries, to
desist from purchasing or selling, long and/or short, securities of the Company,
or “derivative” securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) that any Buyer, and counter parties
in “derivative” transactions to which any such Buyer is a party, directly or
indirectly, presently may have a “short” position in the Common Shares which
were established prior to such Buyer’s knowledge of the transactions
contemplated by the Transaction Documents, and (iii) that each Buyer shall not
be deemed to have any affiliation with or control over any arm’s length counter
party in any “derivative” transaction. The Company further understands and
acknowledges that, except as set forth in Section 4(o), following the public
disclosure of the transactions contemplated by the Transaction Documents
pursuant to the Press Release one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are
outstanding, including, without limitation, during the periods that the value of
the Warrant Shares or Conversion Shares, as applicable, deliverable with respect
to the Securities are being determined and (b) such hedging and/or trading
activities, if any, can reduce the value of the existing stockholders’ equity
interest in the Company both at and after the time the hedging and/or trading
activities are being conducted. Subject to the provisions of Section 2(b) and
Section 4(o), the Company acknowledges that such aforementioned hedging and/or
trading activities do not constitute a breach of this Agreement or any other
Transaction Document or any of the documents executed in connection herewith or
therewith.
 
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(ff) Manipulation of Price. Neither the Company nor any of the Subsidiaries has,
and to their knowledge no Person acting on their behalf has, (i) taken, directly
or indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company or any of the
Subsidiaries to facilitate the sale or resale of any of the Securities, (ii)
sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Company or any of the Subsidiaries.

(gg) U.S. Real Property Holding Corporation. Neither the Company nor any of the
Subsidiaries is, or has ever been, a U.S. real property holding corporation
within the meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company and each Subsidiary shall so certify upon any Buyer’s
request.

(hh) Registration Eligibility. The Company is eligible to register the
Registrable Securities for resale by the Buyers using Form S-3 promulgated under
the 1933 Act.

(ii) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided any of the Buyers or their agents or counsel
with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information. The Company understands and confirms
that each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyers
regarding the Company and the Subsidiaries, their businesses and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company or any of the Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
Each press release issued by the Company or any of the Subsidiaries during the
twelve (12) months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of the Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Buyer makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Sections 2 and 4(o).
 
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4.
COVENANTS.

(a) Best Efforts. Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
 
(b) Form D and Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary in
order to obtain an exemption for, or to, qualify the Securities for sale to the
Buyers at the Closing pursuant to this Agreement under applicable securities or
“Blue Sky” laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to the Buyers on or prior to the Closing Date. The Company shall make all
filings and reports relating to the offer and sale of the Securities required
under applicable securities or “Blue Sky” laws of the states of the United
States following the Closing Date.

(c) Reporting Status. Until the date on which the Buyers shall have sold or
otherwise transferred or disposed of all of the Securities (the “Reporting
Period”), the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would no longer require or otherwise permit
such termination.
 
(d) Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities solely as set forth on Schedule 4(d), and the Company shall repay the
Indebtedness set forth on such schedule immediately following the Closing.

(e) Financial Information. The Company agrees to send the following to each
Investor (as defined in the Registration Rights Agreement) during the Reporting
Period (i) unless the following are filed with the SEC through EDGAR and are
available to the public through the EDGAR system, within one (1) Business Day
after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K
or Form 10-KSB (as the case may be) and Quarterly Reports on Form 10-Q or Form
10-QSB (as the case may be), any interim reports or any consolidated balance
sheets, income statements, stockholders’ equity statements and/or cash flow
statements for any period other than annual, any Current Reports on Form 8-K and
any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of the Subsidiaries
and (iii) copies of any notices and other information made available or given to
the shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.
 
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(f) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system, if any, upon
which the Common Shares are then listed (subject to official notice of issuance)
and shall maintain such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents on such national
securities exchange or automated quotation system. The Company shall maintain
the Common Shares’ authorization for quotation on the Principal Market, the New
York Stock Exchange, the Nasdaq Global Market or the Nasdaq Global Select Market
(each, an “Eligible Market”). The Company shall not take any action which could
be reasonably expected to result in the delisting or suspension of the Common
Shares on an Eligible Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(f).
 
(g) Fees. The Company shall reimburse Magnetar Capital Master Fund, Ltd or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for all reasonable costs and expenses incurred by it
or its affiliates in connection with the transactions contemplated by the
Transaction Documents (including, without limitation, all reasonable legal fees
and disbursements in connection therewith, documentation and implementation of
the transactions contemplated by the Transaction Documents and due diligence in
connection therewith), which amount shall be withheld by Magnetar Capital Master
Fund, Ltd from its Purchase Price at the Closing or paid by the Company upon
termination of this Agreement so long as such termination did not occur as a
result of a material breach by Magnetar Capital Master Fund, Ltd of any of its
obligations hereunder (as the case may be). The Company shall be responsible for
the payment of any placement agent’s fees, financial advisory fees, or broker’s
commissions (other than for Persons engaged by any Buyer) relating to or arising
out of the transactions contemplated hereby. The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in
connection with any claim relating to any such payment.
 
(h) Pledge of Securities. Notwithstanding anything to the contrary contained in
Section 2(g), the Company acknowledges and agrees that the Securities may be
pledged by a Buyer in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities. The pledge of
Securities shall not be deemed to be a transfer, sale or assignment of the
Securities hereunder, and no Buyer effecting a pledge of Securities shall be
required to provide the Company with any notice thereof or otherwise make any
delivery to the Company pursuant to this Agreement or any other Transaction
Document. The Company hereby agrees to execute and deliver such documentation as
a pledgee of the Securities may reasonably request in connection with a pledge
of the Securities to such pledgee by a Buyer.
 
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(i) Disclosure of Transactions and Other Material Information. The Company
shall, on or before 8:30 a.m., New York City Time, on the first (1st) Business
Day after the date of this Agreement, issue a press release (the “Press
Release”) reasonably acceptable to each of the Buyers disclosing all the
material terms of the transactions contemplated by the Transaction Documents. On
or before 8:30 a.m., New York City Time, on the fourth (4th) Business Day
following the date of this Agreement, the Company shall file a Current Report on
Form 8-K describing all the material terms of the transactions contemplated by
the Transaction Documents in the form required by the 1934 Act and attaching all
the material Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the form of the Special
Warrants, the form of Warrants and the Registration Rights Agreement) (including
all attachments, the “8-K Filing”). From and after the issuance of the Press
Release, the Company shall have disclosed all material, nonpublic information
delivered to any of the Buyers by the Company or any of the Subsidiaries, or any
of their respective officers, directors, employees or agents (if any) in
connection with the transactions contemplated by the Transaction Documents. The
Company shall not, and the Company shall cause each of the Subsidiaries and each
of its and their respective officers, directors, employees and agents not to,
provide any Buyer with any material, nonpublic information regarding the Company
or any of the Subsidiaries from and after the issuance of the Press Release
without the express prior written consent of such Buyer, except as expressly
contemplated by Section 4(p)(viii). If a Buyer has, or believes it has, received
any material, nonpublic information regarding the Company or any of its
Subsidiaries in breach of the immediately preceding sentence, such Buyer shall
provide the Company with written notice thereof in which case the Company shall,
within two (2) Trading Days (as defined in the Special Warrants) of the receipt
of such notice, make a public disclosure of all such material, nonpublic
information so provided. In the event of a breach of any of the foregoing
covenants by the Company, any of the Subsidiaries, or any of its or their
respective officers, directors, employees and agents (as determined in the
reasonable good faith judgment of such Buyer), in addition to any other remedy
provided herein or in the Transaction Documents, such Buyer shall have the right
to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information without the
prior approval by the Company, any of the Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any
liability to the Company, any of the Subsidiaries, or any of its or their
respective officers, directors, employees, stockholders or agents, for any such
disclosure. Subject to the foregoing, neither the Company, the Subsidiaries nor
any Buyer shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions (i)
in substantial conformity with the 8-K Filing and contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that in the
case of clause (i) each Buyer shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
Without the prior written consent of any applicable Buyer, the Company shall not
(and shall cause each of the Subsidiaries to not) disclose the name of such
Buyer in any filing, announcement, release or otherwise unless required by
applicable law or regulations.

(j) Additional Registration Statements. Until the Effective Date (as defined in
the Registration Rights Agreement) of the initial Registration Statement
required to be filed by the Company pursuant to Section 2(a) of the Registration
Rights Agreement which covers all of the securities required to be covered
thereunder and at any time while such Registration Statement is not effective,
the Company shall not file a registration statement under the 1933 Act relating
to securities that are not the Registrable Securities; provided, however, that
the Company shall be permitted to file post-effective amendments with respect to
registration statements filed prior to the date hereof so long as no such
amendment (i) increases the amount of securities covered by any such
registration statements or (ii) adds any securities to any such registration
statements.
 
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(k) Additional Issuance of Securities. The Company agrees that for the period
commencing on the date hereof and ending twelve (12) months after the Closing
Date (the “Restricted Period”), neither the Company nor any of the Subsidiaries
shall directly or indirectly issue, offer, sell, grant any option to purchase,
or otherwise dispose of (or announce any issuance, offer, sale, grant or any
option to purchase or other disposition of) any of their respective equity or
equity equivalent securities, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time and
under any circumstances convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, capital stock and other securities of
the Company (including, without limitation, any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Shares at any
time, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Shares or other securities that entitle the holder to receive, directly or
indirectly, Common Shares) (collectively with such capital stock or other
securities of the Company, “Equivalents”) (any such issuance, offer, sale,
grant, disposition or announcement being referred to as a “Subsequent
Placement”). Notwithstanding the foregoing, this Section 4(k) shall not apply in
respect of the issuance of (A) Common Shares or standard options to purchase
Common Shares issued to directors, officers, employees or consultants of the
Company in connection with their service as directors or officers of the
Company, their employment by the Company or their retention as consultants by
the Company pursuant to an equity compensation program or other contract or
arrangement approved by the Board of Directors of the Company (or the
compensation committee of the Board of Directors of the Company), provided that
all such issuances after the date hereof pursuant to this clause (A) do not, in
the aggregate, exceed more than 5% of the Common Shares issued and outstanding
immediately prior to the date hereof, (B) Common Shares in connection with
strategic alliances, acquisitions, mergers, strategic partnerships, joint
ventures, vendor and supplier arrangements and as equity kickers in lease and
financing transactions, the primary purpose of which is not to raise capital,
and which are approved in good faith by the Company’s Board of Directors,
provided that all such issuances after the date hereof pursuant to this clause
(B) do not, in the aggregate, exceed more than 10% of the Common Shares issued
and outstanding immediately prior to the date hereof, (C) Common Shares issued
upon the conversion or exercise of Equivalents issued prior to the date hereof,
provided that such Equivalents have not been amended since the date of this
Agreement to increase the number of shares issuable thereunder or to lower the
exercise or conversion price thereof or otherwise materially change the terms or
conditions thereof in any manner that adversely affects any of the Buyers, (D)
Common Shares issued or issuable by reason of a dividend, stock split or other
distribution on Common Shares, (E) Common Shares or standard warrants to
purchase Common Shares issued to the plaintiffs in connection with the
settlement of (1) the class action lawsuit filed on or about August 10, 2005
against the Company, its chief executive officer and former chief financial
officer, (2) the lawsuit filed on September 27, 2006 by Sunrise Equity Partners,
L.P. against the Company and its former chief executive officer and (3) the
lawsuit filed on April 11, 2007 by Nathan A. Low and Sunrise Foundation Trust,
in each case, alleging, among other things, violations of the 1934 Act (all as
further described in the Company’s most recently filed Form 10-Q), provided that
all such Common Shares issued after the date hereof pursuant to this clause (E)
(including pursuant to the exercise of any such warrants so issued) do not, in
the aggregate, exceed more than 2,000,000 Common Shares, provided further that
no such warrants (i) shall contain (I) any anti-dilution or other adjustment
provisions, other than provisions providing for standard adjustments in the
event of stock dividends, stock splits and stock combinations or (II) an
exercise price that is less than the fair market value of the Common Shares on
the date such warrant is issued or (ii) are amended to increase the number of
shares issuable thereunder or to lower the exercise price thereof or the terms
or conditions thereof are otherwise materially changed in any manner that
adversely affects any of the Buyers, (F) Conversion Shares or (G) Warrant Shares
(each of the foregoing in clauses (A) through (G), collectively the “Excluded
Securities”).
 
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(l) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than
110% of (i) the maximum number of Common Shares issuable upon conversion of the
Special Warrants (assuming for purposes hereof, that the Special Warrants are
convertible at the Conversion Price (as defined in the Special Warrants) and
without regard to any limitations on the exercise of the Special Warrants set
forth therein) and (ii) the maximum number of Common Shares issuable upon
exercise of the Warrants (without regard to any limitations on the exercise of
the Warrants set forth therein).

(m) Conduct of Business. The business of the Company and the Subsidiaries shall
not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

(n) Variable Rate Transaction. From the date hereof until 24 months after the
Effective Date of the initial Registration Statement required to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement which
covers all of the securities required to be covered thereunder, the Company and
each Subsidiary shall be prohibited from effecting or entering into an agreement
to effect any Subsequent Placement involving a “Variable Rate Transaction.” The
term “Variable Rate Transaction” shall mean a transaction in which the Company
or any Subsidiary (i) issues or sells any Equivalents either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the Common Shares at any
time after the initial issuance of such Equivalents, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such Equivalents or upon the occurrence of
specified or contingent events directly or indirectly related to the business of
the Company or the market for the Common Shares, other than pursuant to a
customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, but not limited to, an equity line of credit) whereby the
Company or any Subsidiary may sell securities at a future determined price
(other than standard and customary “preemptive” or “participation” rights). Each
Buyer shall be entitled to obtain injunctive relief against the Company and the
Subsidiaries to preclude any such issuance, which remedy shall be in addition to
any right to collect damages.
 
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(o) Trading Restrictions. Each Buyer represents and warrants to, and covenants
with, the Company that it will not (and its affiliates acting on its behalf or
pursuant to any understanding with it will not) engage in or effect, directly or
indirectly, any transactions in any securities of the Company (including,
without limitation, any Short Sales, “locking-up” borrow or hedging activities
involving the Company’s securities) during the period commencing on the date
hereof and ending on the earlier to occur of (i) one (1) year after the
Effective Date (as defined in the Registration Rights Agreement) of the initial
Registration Statement covering the Registrable Securities to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement, (ii) two
(2) years from the Closing Date, (iii) the date (if any) on which the Common
Shares are trading at a price that is at least two (2) times the initial
Conversion Price (as defined in the Special Warrants) (subject to adjustment as
provided therein) but only if such date is after the applicable Effectiveness
Deadline (as defined in the Registration Rights Agreement) of the initial
Registration Statement covering the Registrable Securities to be filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement and such
Registration Statement has not been declared effective by the SEC and (iv) the
date this Agreement is terminated pursuant to Section 8. In furtherance (and
without limitation) of the foregoing, during such restricted period, neither
such Buyer nor any of such affiliates, (a) will directly or indirectly, sell,
agree to sell, grant any call option or purchase any put option with respect to,
pledge, borrow or otherwise dispose of any securities of the Company, or (b)
will establish or increase any “put equivalent position” or liquidate or
decrease any “call equivalent position” with respect to any such securities (in
each case within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder), or otherwise enter into any swap,
derivative or other transaction or arrangement that transfers to another, in
whole or in part, any economic consequence of ownership of any such securities,
whether or not such transaction is to be settled by delivery of any such
securities, other securities, cash or other consideration. Notwithstanding the
foregoing, it is understood and agreed that nothing contained in this Section
4(o) shall prohibit such Buyer (or such affiliates) from (1) purchasing or
agreeing to purchase unrestricted securities of the Company or securities which
are covered by an effective registration statement and the prospectus included
therein is available for use on the date of such purchase (including through
block trades or privately negotiated transactions), (2) purchasing or agreeing
to purchase securities of the Company pursuant to Section 4(p) or otherwise from
the Company, (3) converting any or all Special Warrants to acquire Conversion
Shares or otherwise acting under or enforcing, or receiving any right or benefit
or adjustment under, the Special Warrants (including, without limitation, the
redemption, purchase and repurchase rights set forth therein), (4) exercising
any or all Warrants to acquire Warrant Shares or otherwise acting under or
enforcing, or receiving any right or benefit or adjustment under, the Warrants,
(5) selling or agreeing to sell “long” securities of the Company (because such
Buyer or such affiliate is “deemed to own such securities” pursuant to paragraph
(b) of Rule 200 under Regulation SHO), including, without limitation, (I) any
Special Warrants, Conversion Shares, Warrants or Warrant Shares acquired
hereunder or pursuant to the transactions contemplated hereby or any of the
Transaction Documents (including, without limitation, pursuant to the terms of a
Fundamental Transaction (as defined in the Warrants)) or (II) securities
acquired after the date hereof in accordance with this paragraph, (6) pledging
or hypothecating any securities of the Company in connection with leverage
arrangements engaged in by such Buyer (or such affiliates) without the purpose
of transferring economic risk relating to such securities, (7) from transferring
any of the Securities to any affiliate who agrees in writing to be bound by this
Section 4(o), in each case, provided such sale is in compliance with all
applicable securities laws and following the public announcement of the
transaction contemplated hereby pursuant to Section 4(i) or (8) disposing of, or
hedging against (including, without limitation, via Short Sales or otherwise),
in accordance with applicable securities laws, any securities, swaps, derivates
or similar financial instruments involving or related to the Company’s
securities, provided that the position was held by such Buyer prior to the date
hereof and such dispositions and hedging are limited in amount to, and do not do
more than fully offset, the position owned by such Buyer prior to the date
hereof.
 
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(p) Participation Right. From the date hereof until the two year anniversary of
the Closing Date, neither the Company nor any Subsidiary shall, directly or
indirectly, effect any Subsequent Placement unless the Company shall have first
complied with this Section 4(p). The Company acknowledges and agrees that the
right set forth in this Section 4(p) is a right granted by the Company,
separately, to each Buyer.
 
(i) The Company shall deliver to each Buyer a written notice (the “Offer
Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”)
of the securities being offered (the “Offered Securities”) in a Subsequent
Placement, which Offer Notice shall (w) identify and describe the Offered
Securities, (x) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged, (y) identify the Persons (if known) to which or
with which the Offered Securities are to be offered, issued, sold or exchanged
and (z) offer to issue and sell to or exchange with such Buyer in accordance
with the terms of the Offer at least 50% of the Offered Securities, provided
that the number of Offered Securities which such Buyer shall have the right to
subscribe for under this Section 4(p) shall be (a) based on such Buyer’s pro
rata portion of the aggregate Conversion Amounts of the Special Warrants
purchased hereunder by all Buyers (the “Basic Amount”), and (b) with respect to
each Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as such
Buyer shall indicate it will purchase or acquire should the other Buyers
subscribe for less than their Basic Amounts (the “Undersubscription Amount”).

(ii) To accept an Offer, in whole or in part, such Buyer must deliver a written
notice to the Company prior to the end of the fifth (5th) Business Day after
such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the
portion of such Buyer’s Basic Amount that such Buyer elects to purchase and, if
such Buyer shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Buyer elects to purchase (in either
case, the “Notice of Acceptance”). If the Basic Amounts subscribed for by all
Buyers are less than the total of all of the Basic Amounts, then such Buyer who
has set forth an Undersubscription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if the
Undersubscription Amounts subscribed for exceed the difference between the total
of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), such Buyer who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Basic Amount of such Buyer bears to
the total Basic Amounts of all Buyers that have subscribed for Undersubscription
Amounts, subject to rounding by the Company to the extent it deems reasonably
necessary. Notwithstanding the foregoing, if the Company desires to modify or
amend the terms and conditions of the Offer in any material respect prior to the
expiration of the Offer Period, the Company may deliver to each Buyer a new
Offer Notice and the Offer Period shall expire on the fifth (5th) Business Day
after such Buyer’s receipt of such new Offer Notice.
 
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(iii) The Company shall have ten (10) Business Days from the expiration of the
Offer Period above (i) to offer, issue, sell or exchange all or any part of such
Offered Securities as to which a Notice of Acceptance has not been given by a
Buyer (the “Refused Securities”) pursuant to a definitive agreement(s) (the
“Subsequent Placement Agreement”), but only to the offerees described in the
Offer Notice (if so described therein) and only upon terms and conditions
(including, without limitation, unit prices and interest rates) that are not
materially more favorable to the acquiring Person or Persons or materially less
favorable to the Company than those set forth in the Offer Notice and (ii) to
publicly announce (a) the execution of such Subsequent Placement Agreement, and
(b) either (x) the consummation of the transactions contemplated by such
Subsequent Placement Agreement or (y) the termination of such Subsequent
Placement Agreement, which shall be filed with the SEC on a Current Report on
Form 8-K with such Subsequent Placement Agreement and any documents contemplated
therein filed as exhibits thereto.

(iv) In the event the Company shall propose to sell less than all the Refused
Securities (any such sale to be in the manner and on the terms specified in
Section 4(p)(iii) above), then such Buyer may, at its sole option and in its
sole discretion, reduce the number or amount of the Offered Securities specified
in its Notice of Acceptance to an amount that shall be not less than the number
or amount of the Offered Securities that such Buyer elected to purchase pursuant
to Section 4(p)(ii) above multiplied by a fraction, (i) the numerator of which
shall be the number or amount of Offered Securities the Company actually
proposes to issue, sell or exchange (including Offered Securities to be issued
or sold to Buyers pursuant to this Section 4(p) prior to such reduction) and
(ii) the denominator of which shall be the original amount of the Offered
Securities. In the event that any Buyer so elects to reduce the number or amount
of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered
Securities unless and until such securities have again been offered to the
Buyers in accordance with Section 4(p)(i) above.

(v) Upon the closing of the issuance, sale or exchange of all or less than all
of the Refused Securities, such Buyer shall acquire from the Company, and the
Company shall issue to such Buyer, the number or amount of Offered Securities
specified in the Notices of Acceptance. The purchase by such Buyer of any
Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and such Buyer of a separate purchase agreement relating
to such Offered Securities reasonably satisfactory in form and substance to such
Buyer and its counsel.
 
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(vi) Any Offered Securities not acquired by a Buyer or other Persons in
accordance with this Section 4(p) may not be issued, sold or exchanged until
they are again offered to such Buyer under the procedures specified in this
Agreement.

(vii) The Company and each Buyer agree that if any Buyer elects to participate
in the Offer, neither the Subsequent Placement Agreement with respect to such
Offer nor any other transaction documents related thereto (collectively, the
“Subsequent Placement Documents”) shall include any term or provision whereby
such Buyer shall be required to agree to any restrictions on trading as to any
securities of the Company owned by such Buyer prior to such Subsequent Placement
more restrictive in any material respect than the restrictions contained in the
Transaction Documents.

(viii) Notwithstanding anything to the contrary in this Section 4(p) and unless
otherwise agreed to by such Buyer, the Company shall either confirm in writing
to such Buyer that the transaction with respect to the Subsequent Placement has
been abandoned or shall publicly disclose its intention to issue the Offered
Securities, in either case in such a manner such that such Buyer will not be in
possession of any material, non-public information, by the tenth (10th) day
following delivery of the Offer Notice. If by such tenth (10th) day, no public
disclosure regarding a transaction with respect to the Offered Securities has
been made, and no notice regarding the abandonment of such transaction has been
received by such Buyer, such transaction shall be deemed to have been abandoned
and such Buyer shall not be deemed to be in possession of any material,
non-public information with respect to the Company or any of the Subsidiaries.
Should the Company decide to pursue such transaction with respect to the Offered
Securities, the Company shall provide such Buyer with another Offer Notice and
such Buyer will again have the right of participation set forth in this Section
4(p). The Company shall not be permitted to deliver more than one such Offer
Notice to such Buyer in any sixty (60) day period.

(ix) The restrictions contained in this Section 4(p) shall not apply in
connection with the issuance of any Excluded Securities. The Company shall not
circumvent the provisions of this Section 4(p) by providing terms or conditions
to one Buyer that are not provided to all.

(q) Passive Foreign Investment Company. The Company shall conduct its business
in such a manner as will ensure that the Company will not be deemed to
constitute a passive foreign investment company within the meaning of Section
1297 of the U.S. Internal Revenue Code of 1986, as amended.
 
5.
REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

(a) Register. The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to each
holder of Securities), a register for the Special Warrants and the Warrants in
which the Company shall record the name and address of the Person in whose name
the Special Warrants and the Warrants have been issued (including the name and
address of each transferee), the Conversion Amount of the Special Warrants held
by such Person, the number of Conversion Shares issuable upon conversion of the
Special Warrants and the number of Warrant Shares issuable upon exercise of the
Warrants held by such Person. The Company shall keep the register open and
available at all times during business hours for inspection of any Buyer or its
legal representatives.
 
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(b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent and any subsequent transfer agent in the form
reasonably acceptable to each of the Buyers (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable balance
accounts at The Depository Trust Company (“DTC”), registered in the name of each
Buyer or its respective nominee(s), for the Conversion Shares and the Warrant
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Special Warrants or the exercise of the Warrants
(as the case may be). The Company represents and warrants that no instruction
other than the Irrevocable Transfer Agent Instructions referred to in this
Section 5(b), and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent with respect to the
Securities, and that the Securities shall otherwise be freely transferable on
the books and records of the Company, to the extent provided in this Agreement
and the other Transaction Documents. If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(g), the Company shall
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or in compliance
with Rule 144, the transfer agent shall issue such shares to the Buyer, assignee
or transferee (as the case may be) without any restrictive legend in accordance
with Section 5(d) below. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b), that
a Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required. The Company shall cause its counsel to
issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company’s transfer agent on each Effective Date. Any fees
(with respect to the transfer agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of any legends on
any of the Securities shall be borne by the Company.
 
(c) Legends. Each Buyer understands that the certificates or other instruments
representing the Special Warrants and the Warrants and, until such time as the
resale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act as contemplated by the Registration Rights Agreement, the
stock certificates representing the Conversion Shares and the Warrant Shares,
except as set forth below, shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):
 
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[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL TO THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
 
(d) Removal of Legends. Certificates evidencing the Conversion Shares or Warrant
Shares shall not be required to contain the legend set forth in Section 5(c)
above or any other legend (i) while a registration statement (including the
Registration Statement) covering the resale of such Securities is effective
under the Securities Act and the applicable Buyer indicates in its conversion or
exercise notice that it intends to, immediately following such conversion or
exercise, sell the number of Conversion Shares or Warrant Shares specified in
such notice under such Registration Statement, (ii) following any sale of such
Securities pursuant to Rule 144 (assuming the transferor is not an affiliate of
the Company), (iii) if such Securities are eligible to be sold, assigned or
transferred under Rule 144(k) (provided that a Buyer provides the Company with
reasonable assurances that such Securities are eligible for sale, assignment or
transfer under Rule 144(k) which shall not include an opinion of counsel), (iv)
in connection with a sale, assignment or other transfer (other than under Rule
144) provided such Buyer provides the Company with an opinion of counsel to such
Buyer, in a generally acceptable form, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act or (v) if such legend is not required
under applicable requirements of the 1933 Act (including, without limitation,
controlling judicial interpretations and pronouncements issued by the SEC). If a
legend is not required pursuant to the foregoing, the Company shall no later
than two (2) Trading Days following the delivery by a Buyer to the Company or
the transfer agent (with notice to the Company) of a legended certificate
representing such Securities (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer, if applicable), together with any other deliveries from such Buyer as
may be required above in this Section 5(d), as directed by such Buyer, either:
(A) deliver (or cause to be delivered to) such Buyer a certificate representing
such Securities that is free from all restrictive and other legends or (B)
credit the balance account of such Buyer’s or such Buyer’s nominee with DTC with
a number of Common Shares equal to the number of Conversion Shares or Warrant
Shares (as the case may be) represented by the certificate or conversion or
exercise notice so delivered by such Buyer (the date by which such certificate
is required to be delivered to such Buyer or such credit is so required to be
made to the balance account of such Buyer’s or such Buyer’s nominee with DTC
pursuant to the foregoing is referred to herein as the “Required Delivery
Date”).
 
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(e) Failure to Timely Deliver; Buy-In. If the Company fails to use its best
efforts to (i) issue and deliver (or cause to be delivered) to a Buyer by the
Required Delivery Date a certificate representing the Conversion Shares or
Warrant Shares required to be so delivered by the Company to such Buyer that is
free from all restrictive and other legends or (ii) credit the balance account
of such Buyer’s or such Buyer’s nominee with DTC for such number of shares of
Conversion Shares or Warrant Shares required to be so delivered by the Company,
then, in addition to all other remedies available to such Buyer, the Company
shall pay in cash to such Buyer on each day after the Required Delivery Date
that the issuance or credit of such shares is not timely effected an amount
equal to 1% of the initial Conversion Amount of such Buyer’s Special Warrant. In
addition to the foregoing, if the Company fails to so properly deliver such
unlegended certificates or so properly credit the balance account of such
Buyer’s or such Buyer’s nominee with DTC by the Required Delivery Date, and if
on or after the Required Delivery Date such Buyer purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
such Buyer of Common Shares that such Buyer anticipated receiving from the
Company without any restrictive legend (a “Buy-In”), then the Company shall,
within three (3) Trading Days after such Buyer’s request and in such Buyer’s
sole discretion, either (i) pay cash to such Buyer in an amount equal to such
Buyer’s total purchase price (including brokerage commissions, if any) for the
Common Shares so purchased (the “Buy-In Price”), at which point the Company’s
obligation to deliver such certificate or credit such Buyer’s balance account
shall terminate and such shares shall be cancelled, or (ii) promptly honor its
obligation to deliver to such Buyer a certificate or certificates or credit such
Buyer’s DTC account representing such number of Common Shares that would have
been issued if the Company timely complied with its obligations hereunder and
pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Conversion Shares or
Warrant Shares (as the case may be) that the Company was required to deliver to
such Buyer by the Required Delivery Date times (B) the VWAP of the Common Shares
for the five (5) Trading Day period immediately preceding the Required Delivery
Date.

For purposes of this Section 5(e), “VWAP” means, for any security as of any
date, the dollar volume-weighted average price for such security 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 is then traded) during the period
beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00 p.m., New
York City Time, as reported by Bloomberg through its “Volume at Price” function
or, if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York City
Time, and ending at 4:00:00 p.m., New York City Time, as reported by Bloomberg,
or, if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If VWAP cannot be calculated for such security on such
date on any of the foregoing bases, the VWAP of such security on such date shall
be the fair market value as mutually determined by the Company and the Buyer. If
the Company and the Buyer are unable to agree upon the fair market value of such
security, then they shall agree in good faith on a reputable investment bank to
make such determination of fair market value, whose determination shall be final
and binding and whose fees and expenses shall be borne by the Company. All such
determinations shall be appropriately adjusted for any share dividend, share
split or other similar transaction during such period.
 
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6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

(a) The obligation of the Company hereunder to issue and sell the Special
Warrants and the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:

(i) Such Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.

(ii) Such Buyer and each other Buyer shall have delivered to the Company the
Purchase Price (less, in the case of Magnetar Capital Master Fund, Ltd, the
amount withheld pursuant to Section 4(g)) for the Special Warrants and the
related Warrants being purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided by the
Company.

(iii) The representations and warranties of such Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
 
7.
CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. 

(a) The obligation of each Buyer hereunder to purchase the Special Warrants and
the related Warrants at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer’s sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:

(i) The Company shall have duly executed and delivered to such Buyer (A) each of
the Transaction Documents and (B) the Special Warrants for such Conversion
Amount as is set forth across from such Buyer’s name in column (3) of the
Schedule of Buyers and the related Warrants (in such numbers as is set forth
across from such Buyer’s name in column (4) of the Schedule of Buyers) being
purchased by such Buyer at the Closing pursuant to this Agreement.

(ii) Such Buyer shall have received the opinion of Cozen O’Connor, the Company’s
outside U.S. counsel, and Perley-Robertson, Hill & McDougall LLP, the Company’s
Canadian counsel, in each case dated as of the Closing Date, in forms reasonably
acceptable to such Buyer.

(iii) The Company shall have delivered to such Buyer a copy of the Irrevocable
Transfer Agent Instructions, in form reasonably acceptable to such Buyer, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
 
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(iv) The Company shall have delivered to such Buyer a certificate evidencing the
formation and good standing of the Company and each of the Subsidiaries in each
such entity’s jurisdiction of formation issued by the Secretary of State (or
equivalent) of such jurisdiction of formation as of a date within ten (10) days
of the Closing Date.

(v) The Company shall have delivered to such Buyer a certificate evidencing the
Company’s qualification as a foreign corporation and good standing issued by the
Secretary of State (or comparable office) of each jurisdiction in which the
Company conducts business and is required to so qualify, as of a date within ten
(10) days of the Closing Date.
 
(vi) The Company shall have delivered to such Buyer a certified copy of the
Articles of Incorporation within ten (10) days of the Closing Date.

(vii) The Company shall have delivered to such Buyer a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s board of
directors in a form reasonably acceptable to such Buyer, (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect at the Closing, in form
reasonably acceptable to such Buyer.

(viii) Each and every representation and warranty of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such date) and the Company
shall have performed, satisfied and complied in all respects with the covenants,
agreements and conditions required to be performed, satisfied or complied with
by the Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in form reasonably acceptable to such Buyer.

(ix) The Company shall have delivered to such Buyer a letter from the Company’s
transfer agent certifying the number of Common Shares outstanding on the Closing
Date immediately prior to the Closing.

(x) The Common Shares (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum maintenance requirements of the Principal
Market.

(xi) The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities,
including without limitation, those required by the Principal Market.
 
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(xii) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

(xiii) Since the date of execution of this Agreement, no event or series of
events shall have occurred that reasonably would have or result in a Material
Adverse Effect.

(xiv) The Company shall have obtained approval of the Principal Market to list
the Conversion Shares and the Warrant Shares.

(xv) The aggregate Purchase Price paid to the Company for the Securities by the
Buyers at the Closing shall not be less than $20 million.

(xvi) The Company shall have delivered to such Buyer such other documents
relating to the transactions contemplated by this Agreement as such Buyer or its
counsel may reasonably request.
 
8.
TERMINATION. 

In the event that the Closing shall not have occurred with respect to a Buyer on
or before ten (10) days from the date hereof due to the Company’s or such
Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7 above
(and a non-breaching party’s failure to waive such unsatisfied condition(s)),
any such non-breaching party at any time shall have the right to terminate its
obligations under this Agreement with respect to such breaching party on or
after the close of business on such date without liability of such non-breaching
party to any other party; provided, however, that the abandonment of the sale
and purchase of the Special Warrants and the Warrants shall be applicable only
to such non-breaching party providing such written notice; provided further,
notwithstanding any such termination the Company shall remain obligated to
reimburse the non-breaching Buyers for the expenses described in Section 4(g)
above. Nothing contained in this Section 8 shall be deemed to release any party
from any liability for any breach by such party of the terms and provisions of
this Agreement or the other Transaction Documents or to impair the right of any
party to compel specific performance by any other party of its obligations under
this Agreement or the other Transaction Documents.
 
9.
MISCELLANEOUS.

(a) Governing Law; Jurisdiction; Jury Trial. 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 Chicago, Illinois, for
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 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. 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.
 
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(b) Counterparts. 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 a portable document format
(.pdf) 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 signature page
were an original thereof.

(c) Headings; Gender. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. 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. For purposes of this Agreement for each Buyer’s benefit, the word “state”
or “states” includes any “province” or “provinces” in Canada and the concept of
“law, rules or regulations” includes laws, rules and regulations under
applicable law, rules and regulations in Canada.

(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
 
(e) Entire Agreement; Amendments. This Agreement, the other Transaction
Documents and the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all other prior oral or
written agreements between the Buyers, the Company, their affiliates and Persons
acting on their behalf with respect to the matters contained herein and therein,
and this Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and the holders of at least a majority of the then outstanding
Conversion Amounts of the Special Warrants issued hereunder, and any amendment
to, or waiver of any provision of, this Agreement made in conformity with the
provisions of this Section 9(e) shall be binding on all Buyers and holders of
Securities, as applicable, provided that (i) any party may give a waiver in
writing as to itself, and (ii) Section 4(o) may not be amended or waived. 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 Special Warrants then outstanding. No consideration shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration also is
offered to all of the parties to the Transaction Documents, holders of the
Special Warrants or holders of the Warrants (as the case may be). The Company
has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents. Without limiting the
foregoing, the Company confirms that, except as set forth in this Agreement, no
Buyer has made any commitment or promise or has any other obligation to provide
any financing to the Company, any Subsidiary or otherwise.
 
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(f) Notices. 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); 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.
495 March Road
Ottawa, Ontario, Canada K2K-3G1
Telephone:
613-270-0619
Facsimile:
613-236-9819
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, Esquire
   
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

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,
 
with a copy (for informational purposes only) to:
 
Greenberg Traurig, LLP
77 W. Wacker Drive, Suite 2400
Chicago, Illinois 60602
Telephone:
(312) 456-8400
Facsimile:
(312) 456-8435
Attention:
Peter H. Lieberman, Esq.
 
Todd A. Mazur, 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;
provided that Greenberg Traurig, LLP shall only be provided copies of notices
sent to Magnetar Capital Master 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
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.

(g) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of any of the Securities. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least a majority of the aggregate number of
Registrable Securities issued and issuable under the Transaction Documents,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Warrants) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Warrants). A
Buyer may assign some or all of its rights hereunder in connection with transfer
of any of its Securities without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights.

(h) No Third Party Beneficiaries. 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 Indemnitees referred to in Section 9(k).
 
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(i) Survival. Unless this Agreement is terminated under Section 8 in accordance
with the terms thereof, the representations, warranties, agreements and
covenants shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.

(j) Further Assurances. 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.
 
(k) Indemnification. In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company’s other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each affiliate of a Buyer that holds any Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
“Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in any of the Transaction Documents, (b) any breach of any covenant,
agreement or obligation of the Company contained in any of the Transaction
Documents or (c) any cause of action, suit or claim brought or made against such
Indemnitee by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Transaction
Documents, (ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities,
(iii) any disclosure properly made by such Buyer pursuant to Section 4(i), or
(iv) the status of such Buyer or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Transaction Documents;
provided, that no Buyer shall be entitled to indemnification to the extent any
of the foregoing is caused by its gross negligence or willful misconduct. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 9(k)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.

(l) No Strict Construction. 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.

(m) Remedies. Each Buyer and each affiliate of a Buyer that holds any Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes that in the event that it fails to perform,
observe, or discharge any or all of its obligations under the Transaction
Documents, any remedy at law may prove to be inadequate relief to the Buyers.
The Company therefore agrees that the Buyers shall be entitled to seek specific
performance and/or temporary, preliminary and permanent injunctive or other
equitable relief from any court of competent jurisdiction in any such case
without the necessity of proving damages and without posting a bond or other
security.
 
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(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Buyer may rescind or withdraw, in its
sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights

(o) Payment Set Aside. To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of
each Buyer under the Transaction Documents are several and not joint with the
obligations of any other Buyer, and no Buyer shall be responsible in any way for
the performance of the obligations of any other Buyer under any Transaction
Document. Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the Buyers are in
any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or any
matters, and the Company acknowledges that the Buyers are not acting in concert
or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents. The decision of each Buyer to purchase Securities
pursuant to the Transaction Documents has been made by such Buyer independently
of any other Buyer. Each Buyer acknowledges that no other Buyer has acted as
agent for such Buyer in connection with such Buyer making its investment
hereunder and that no other Buyer will be acting as agent of such Buyer in
connection with monitoring such Buyer’s investment in the Securities or
enforcing its rights under the Transaction Documents. The Company and each Buyer
confirms that each Buyer has independently participated with the Company in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. Each Buyer 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 Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose. The use of a single agreement to effectuate the
purchase and sale of the Securities contemplated hereby was solely in the
control of the Company, not the action or decision of any Buyer, and was done
solely for the convenience of the Company and not because it was required or
requested to do so by any Buyer. It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction Document is
between the Company and a Buyer, solely, and not between the Company and the
Buyers collectively and not between and among the Buyers.
 
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(q) Delivery of Securities. Notwithstanding anything contained in this Agreement
or any other Transaction Document to the contrary, unless otherwise directed in
writing by the applicable Buyer, the Company shall, and shall cause its agents
and representatives to, deliver all of such Buyer’s securities purchased
pursuant to this Agreement (and all securities which are issuable to such Buyer
pursuant to the terms of this Agreement or any other Transaction Document) to
the address for delivery of securities set forth on such Buyer’s signature page
to this Agreement, and copies of the certificates representing such securities
shall be sent to such Buyer to the address of such Buyer as set forth on such
Buyer’s signature page to this Agreement.

[signature pages follow]
 
35

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

       
COMPANY:
      WORKSTREAM INC.  
   
   
    By:   /s/ Michael Mullarkey    

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Name: Michael Mullarkey  
Title: Chairman

 
 

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IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this 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          /s/ Doug Litowitz    
  By: Doug Litowitz   Its: Counsel

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

       
BUYERS:
      SRB Greenway Capital (QP), L.P.         By: SRB Management, L.P., General
Partner   By: BC Advisors, L.L.C., General Partner  
   
   
    By:   /s/ Steven R. Becker      

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Name: Steven R. Becker   Title: Member 

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

       
BUYERS:
      SRB Greenway Capital, L.P.         By: SRB Management, L.P., General
Partner   By: BC Advisors, L.L.C., General Partner  
   
   
    By:   /s/ Steven R. Becker      

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Name: Steven R. Becker   Title: Member 

 

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

       
BUYERS:
      SRB Greenway Offshore Operating Fund, L.P.         By: SRB Management,
L.P., General Partner   By: BC Advisors, L.L.C., General Partner  
   
   
    By:   /s/ Steven R. Becker      

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Name: Steven R. Becker   Title: Member 

 
 

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

       
BUYERS:
      TALKOT FUND, L.P.  
   
   
    By:   /s/ Thomas B. Akin     

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Name: Thomas B. Akin   Title: General Partner

 
 

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

       
BUYERS:
      TOM AKIN IRA INDIVIDUAL ACCOUNT  
   
   
    By:   /s/ Thomas B. Akin     

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Name: Thomas B. Akin   Title: 

 
 

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

       
BUYERS:
      CRESTVIEW CAPITAL MASTER, LLC  
   
   
    By:   /s/ Stewart Flink    

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Name: Stewart Flink   Title: Manager

 
 

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

       
BUYERS:
      FORT MASON PARTNERS, LP  
   
   
    By:   /s/ Dan German   

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Name: Dan German   Title: Managing Member

 
 

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

       
BUYERS:
      FORT MASON MASTER, LP  
   
   
    By:   /s/ Dan German   

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Name: Dan German   Title: Managing Member

 
 

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

       
BUYERS:
      CCM MASTER QUALIFIED FUND, LTD  
   
   
    By:   /s/ Clint D. Coghill   

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Name: Clint D. Coghill   Title: Director

 
 

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SCHEDULE OF BUYERS
 
(1)
 
(2)
 
(3)
 
(4)
 
(5)
 
(6)
                     
Buyer
 
Address and Facsimile Number
 
Conversion Amount of Special Warrants
 
Aggregate Number of Warrants
 
Purchase Price
 
Legal Representative’s
Address and Facsimile Number
                                           
Magnetar Capital Master Fund, Ltd
 
1603 Orrington Avenue, 13th Floor
Evanston, IL 60201
Attn: Michael Balkin
Facsimile: (847) 905-5603
 
$5,000,000
 
1,000,000
 
$5,000,000
 
Greenberg Traurig, LLP
77 W. Wacker Drive, Suite 2500
Chicago, Illinois 60601
Attention: Peter H. Lieberman
         Todd A. Mazur
Facsimile: (312) 456-8435
Telephone: (312) 456-8400
                     
SRB Greenway Capital (QP), L.P.
 
300 Crescent Court, Suite 1111
Dallas, Texas 75201
Attn: George Lee
Facsimile: (214) 756-6079
 
$1,728,300
 
345,660
 
$1,728,300
 
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom
Facsimile: (973) 597-2383
Telephone: (973) 597-2382
                     
SRB Greenway Capital, L.P.
 
300 Crescent Court, Suite 1111
Dallas, Texas 75201
Attn: George Lee
Facsimile: (214) 756-6079
 
$199,500
 
39,900
 
$199,500
 
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom
Facsimile: (973) 597-2383
Telephone: (973) 597-2382
                     
SRB Greenway Offshore Operating Fund, L.P.
 
300 Crescent Court, Suite 1111
Dallas, Texas 75201
Attn: George Lee
Facsimile: (214) 756-6079
 
$72,200
 
14,440
 
$72,200
 
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068
Attn: John D. Hogoboom
Facsimile: (973) 597-2383
Telephone: (973) 597-2382
                     
Tom Akin IRA Individual Account
 
2400 Bridgeway
Suite 300
Sausalito, CA 94965
Attn: Thomas B. Akin
Facsimile: (415) 332-6019
 
$1,000,000
 
200,000
 
$1,000,000
 
Elected Not To Provide
                     
Talkot Fund, L.P.
 
2400 Bridgeway
Suite 300
Sausalito, CA 94965
Attn: Thomas B. Akin
Facsimile: (415) 332-6019
 
$2,000,000
 
400,000
 
$2,000,000
 
Elected Not To Provide
                     

 

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Crestview Capital Master, LLC
 
95 Revere Drive, Ste. A
Northbrook, IL 60062
Attn: Stewart Flink
Facsimile: (847) 559-5807
 
$2,000,000
 
400,000
 
$2,000,000
 
Elected Not To Provide
                     
Fort Mason Partners, LP
 
c/o Fort Mason Capital, LLC
4 Embarcadero Center
Suite 2050
San Francisco, CA 94111
Facsimile: (415) 288-8113
mjensen@fortmasoncapital.com
dsmolen@fortmasoncapital.com
 
$182,700
 
36,540
 
$182,700
 
Elected Not To Provide
                     
Fort Mason Master, LP
 
c/o Fort Mason Capital, LLC
4 Embarcadero Center
Suite 2050
San Francisco, CA 94111
Facsimile: (415) 288-8113
mjensen@fortmasoncapital.com
dsmolen@fortmasoncapital.com
 
$2,817,300
 
563,460
 
$2,817,300
 
Elected Not To Provide
                     
CCM Master Qualified Fund, Ltd
 
One North Wacker Drive
Suite 4350
Chicago, IL 60606
Attn: James Schuler
Facsimile: (312) 324-2001
 
$5,000,000
 
1,000,000
 
$5,000,000
 
Seward & Kissel, LLP
One Battery Park Plaza
New York, New York 10004
Attn: Craig A. Sklar
Telephone: (212) 574-1386
Facsimile: (212) 480-8421

 
 

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EXHIBITS
 
Exhibit A
Form of Special Warrants
Exhibit B
Form of Warrant
Exhibit C
Form of Registration Rights Agreement

 
Schedule 3(n)
Notice from Principal Market
Schedule 3(q)
Transactions with Affiliates
Schedule 3(r)
Capitalization
Schedule 3(s)
Indebtedness and Other Contracts
Schedule 3(t)
Litigation
Schedule 3(w)
Title
Schedule 4(d)
Use of Proceeds

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