Exhibit 10.1
EXCHANGE AGREEMENT
 
This EXCHANGE AGREEMENT (the “Agreement”), dated as of August 29, 2008, is being
entered into by and between 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 “Holder”).

RECITALS
 
A. The Company, the Holder and various others entered into that certain
Transaction Agreement, dated as July 25, 2007 (as amended and modified by this
Agreement and the Other Exchange Agreements (as defined below), the “Transaction
Agreement”).
 
B.Simultaneously with the consummation of the transactions contemplated by the
Transaction Agreement, (i) the Company, the Holder and various others entered
into that certain Registration Rights Agreement dated as of August 3, 2007 (the
“Registration Rights Agreement”) and (ii) the Company issued and sold to the
Holder for $_________ a special warrant initially convertible into _________ of
the Company’s common shares, no par value (the “Common Shares”) (the “Special
Warrant”) and a warrant initially exercisable for _________ Common Shares (the
“2007 Warrant”).

C. Since the issuance of the Special Warrant, various Triggering Events (as
defined in the Special Warrant) have occurred thereunder.

D. In exchange for the Special Warrant, the Company has authorized the issuance
to the Holder of a senior secured note, in the form attached hereto as Exhibit A
(including all senior secured notes issued in exchange therefor or replacement
thereof, the “Note”).

E. In exchange for the 2007 Warrant, the Company has authorized the issuance to
the Holder of a warrant, in the form attached hereto as Exhibit B (including all
warrants issued in exchange therefor or replacement thereof, the “Warrant”),
which Warrant shall be exercisable for Common Shares (as exercised, the “Warrant
Shares”), in accordance with the terms thereof.

F. The Note, the Warrant and the Warrant Shares are collectively referred to
herein as the “Securities.”
 
G. The exchange of the Special Warrant and the 2007 Warrant for the Note and
Warrant is being made in reliance upon the exemption from registration provided
by Section 3(a)(9) of the Securities Act of 1933, as amended (the “1933 Act”).

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H. As additional consideration for the transactions contemplated hereby, (i)
each of the Subsidiaries (as defined below) will execute a guaranty in favor of
the Holder in the form attached hereto as Exhibit C (the “Guaranty” and
collectively the “Guaranties”) pursuant to which it guarantees the obligations
of the Company under the Note and (ii) the Note will be secured by a first
priority perfected security interest in all of the assets of the Company and the
Subsidiaries as evidenced by the security agreement in the form attached hereto
as Exhibit D (the ”Security Agreement” and, together with the other security
documents and agreements entered into in connection with this Agreement, as each
may be amended or modified from time to time, collectively, the “Security
Documents”).

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 the Holder hereby
agree as follows:
 
1.
EXCHANGE OF SPECIAL WARRANT AND 2007 WARRANT.

 
(a) Special Warrant and 2007 Warrant. Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, the Company shall, pursuant
to Section 3(a)(9) of the 1933 Act, exchange (i) the Special Warrant for the
Note and (ii) the 2007 Warrant for the Warrant.
 
(b) Closing. The closing (the “Closing”) of the exchange of the Special Warrant
and the 2007 Warrant 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 the Holder). 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) Delivery. On the Closing Date, (i) the Holder shall deliver the Special
Warrant and the 2007 Warrant to the Company and (ii) the Company shall exchange
and deliver to the Holder (A) the Note for the Special Warrant and (B) the
Warrant for the 2007 Warrant, in all cases duly executed on behalf of the
Company and registered in the name of the Holder or its designee.
 
2.
HOLDER’S REPRESENTATIONS AND WARRANTIES.

 
The Holder represents and warrants to the Company:
 
(a) Organization; Authority. The Holder 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 Exchange Documents (as defined
below) to which it is a party and otherwise to carry out its obligations
thereunder. For purposes of this Agreement, “Exchange Documents” means this
Agreement, the Note, the Warrant, the Security Documents, the Guaranties, the
Amended Registration Rights Agreement (as defined below), the Irrevocable
Transfer Agent Instructions (as defined below), 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. The Holder is (i) acquiring the Note and the
Warrant and (ii) upon exercise of the Warrant 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, the Holder does
not agree, or make any representation or warranty 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. The Holder is not a broker-dealer
registered, or required to be registered, with the United States Securities and
Exchange Commission (the “SEC”) under the 1934 Act (as defined below). The
Holder is acquiring the Securities hereunder in the ordinary course of its
business. The Holder does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.
 
(c) Accredited Investor Status. The Holder is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.
 
(d) Reliance on Exemptions. The Holder understands that the Securities are being
offered and issued 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 the
Holder’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Holder set forth herein in order to
determine the availability of such exemptions and the eligibility of the Holder
to acquire the Securities.
 
(e) Information. The Holder 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 issuance of the Securities which have
been requested by the Holder. The Holder 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 the Holder or its
advisors, if any, or its representatives shall modify, amend or affect the
Holder’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Exchange
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby. The Holder understands that its acquisition of the
Securities involves a high degree of risk. The Holder 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. The Holder 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 acquisition of the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.
 
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(g) Transfer or Resale. The Holder understands that except as provided in the
Amended Registration Rights Agreement: (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) the Holder shall have delivered to the Company an
opinion of counsel to the Holder (if requested by the Company), 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) the Holder provides the Company with
reasonable assurance (which shall not include an opinion of counsel) 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 below) 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.
 
(i) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Holder and shall constitute the legal,
valid and binding obligations of the Holder enforceable against the Holder in
accordance with its 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.
 
(j) No Conflicts. The execution, delivery and performance by the Holder of this
Agreement and the consummation by the Holder of the transactions contemplated
hereby will not (i) result in a violation of the organizational documents of the
Holder 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 the Holder 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 the Holder, 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 the
Holder to perform its obligations hereunder.
 
(k) Residency. The Holder is a resident of that jurisdiction specified in its
address on the Schedule of Buyers attached to the Transaction Agreement.
 
(l) General Solicitation. The Holder is not acquiring 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.
 
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3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 
The Company represents and warrants to the Holder that:
 
(a) Organization and Qualification. The Company and each Subsidiary (as defined
below) 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 Exchange Documents or (iii) the
authority or ability of the Company or any of the Subsidiaries to perform their
respective obligations under any of the Transaction Documents (as defined in the
Transaction Agreement) or any of the Exchange Documents. 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,
6FigureJobs.com, Inc., a Delaware corporation, and Workstream Merger Sub Inc., a
Delaware corporation, are collectively referred to herein as the “Subsidiaries”
and each 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 Exchange
Documents to which it is a party and to issue the Securities in accordance with
the terms thereof. Each Subsidiary has the requisite power and authority to
enter into and perform its obligations under the Exchange Documents to which it
is a party. The execution and delivery by the Company of this Agreement and the
other Exchange Documents to which it is a party, and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Warrant and the reservation for issuance and
issuance of the Warrant Shares issuable upon exercise of the Warrant) 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 (as defined in the Amended
Registration Rights Agreement) in accordance with the requirements of the
Amended 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 shareholders. The
execution and delivery by each Subsidiary of the Exchange Documents to which it
is a party, and the consummation by such Subsidiary of the transactions
contemplated thereby have been duly authorized by the board of directors of such
Subsidiary, and no further filing, consent or authorization is required by such
Subsidiary, its board of directors or its stockholders. This Agreement and the
other Exchange Documents to which it is a party 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. The Exchange Documents to which it is a party have been duly
executed and delivered by each Subsidiary, and constitute the legal, valid and
binding obligations of such Subsidiary, enforceable against such Subsidiary 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 Note and the Warrant has been
duly authorized and, upon issuance in accordance with the terms of the Exchange
Documents, the Note and the Warrant 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
maximum number of Warrant Shares issuable upon exercise of the Warrant (without
regard to any limitations on the exercise of the Warrant set forth therein).
Upon exercise in accordance with the Warrant, the Warrant Shares, when issued,
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 Holder in this Agreement, the offer and
issuance by the Company of the Securities is exempt from registration under the
1933 Act. The offer and issuance of the Note and the Warrant is exempt from
registration under the 1933 Act pursuant to the exemption provided by Section
3(a)(9) thereof.
 
(d) No Conflicts. The execution, delivery and performance by the Company of the
Exchange Documents to which it is party and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Note, the Warrant, the Warrant Shares and the reservation
for issuance of the Warrant Shares) will not (i) result in a violation of the
Articles of Incorporation (as defined below) 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 below) 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 or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign, 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 and Ontario 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
conflict, default, termination rights or violations, as the case may be, could
not reasonably be expected to have a Material Adverse Effect. The execution,
delivery and performance by each Subsidiary of the Exchange Documents to which
it is party and the consummation by such Subsidiary of the transactions
contemplated thereby will not (i) result in a violation of the Articles of
Incorporation 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 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 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 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 conflict, default, termination rights or violations, as the case may
be, could not reasonably be expected to have a Material Adverse Effect.
 
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(e) Consents. Neither the Company nor any Subsidiary is 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
respective obligations under or contemplated by the Exchange Documents to which
it is a party, in each case, in accordance with the terms hereof and thereof.
All consents, authorizations, orders, filings and registrations which the
Company or any Subsidiary is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the Closing Date, and
neither the Company nor any Subsidiary is aware of any facts or circumstances
which might prevent the Company or any Subsidiary 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 the Holder’s Acquisition of Securities. The Company
acknowledges and agrees that the Holder is acting solely in the capacity of an
arm’s length party with respect to the Exchange Documents and the transactions
contemplated hereby and thereby and that the Holder is not (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 the Holder is
not acting as a financial advisor or fiduciary of the Company or any of the
Subsidiaries (or in any similar capacity) with respect to the Exchange Documents
and the transactions contemplated hereby and thereby, and any advice given by
the Holder or any of its representatives or agents in connection with the
Exchange Documents and the transactions contemplated hereby and thereby is
merely incidental to the Holder’s acquisition of the Securities. The Company
further represents to the Holder that the Company’s and each Subsidiary’s
decision to enter into the Exchange Documents has been based solely on the
independent evaluation by the Company, each Subsidiary and their respective
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 promulgated by the SEC under the 1933 Act)
in connection with the offer or issuance 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 the Holder 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 offer or issuance of
the Securities.
 
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(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, whether through integration with prior
offerings or otherwise, or cause this offering of Securities (together with any
other offering under the Other Exchange Agreements) to require approval of
shareholders of the Company under any applicable shareholder 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.
 
(i) Dilutive Effect. The Company understands and acknowledges that the number of
Warrant Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue the Warrant Shares upon exercise of
the Warrant in accordance with this Agreement and the Warrant is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders 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 the Holder as a result of the
transactions contemplated by this Agreement, including, without limitation, the
Company’s issuance of the Securities and the Holder’s ownership of the
Securities. The Company and its board of directors have taken all necessary
action, if any, in order to render inapplicable any 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.
 
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(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 Holder or its 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 Holder 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.
 
(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, individually or in the
aggregate, or (iii) made any material capital expenditures, individually or in
the aggregate. 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 below), (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.
 
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(m) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is reasonably
expected 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.
 
(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 could 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
would 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.
 
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(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.
 
(r) Equity Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) unlimited Common Shares, of which
52,551,119 shares are issued and outstanding, no shares are held in treasury,
and 2,738,534 shares are reserved for issuance pursuant to securities (other
than 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. 11,915,911 shares of the Company’s issued and
outstanding Common Shares on the date hereof are 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, no Person 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
below) 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 amounts 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
Amended 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 Holder 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.
 
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(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, any other
entity 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.
 
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(w) Title. 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, 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.
 
(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, original works, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights and all
applications and registrations therefor (“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 or any of the Subsidiaries, 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 defined below), (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.
 
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(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.
 
(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 maintains internal
control over financial reporting (as such term is defined in Rule 13a-15(f)
under the 1934 Act) that is effective to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles, including 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-15(e) 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 or other Person relating to any
potential material weakness or significant deficiency in any part of the
Company’s internal control over financial reporting.

(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.
 
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(dd) Investment Company Status. The Company is not, and upon consummation of the
exchange and issuance 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 the Holder’s Trading Activity. It is understood
and acknowledged by the Company (i) that, other than as contemplated by Section
4(o) of the Transaction Agreement, the Holder has not been asked by the Company
or any of the Subsidiaries to agree, nor has the Holder 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 the Holder, and counter parties in “derivative” transactions to which the
Holder is a party, directly or indirectly, presently may have a “short” position
in the Common Shares which were established prior to the Holder’s knowledge of
the transactions contemplated by the Exchange Documents, and (iii) that the
Holder 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) of the
Transaction Agreement, the Holder 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 deliverable with respect to the Warrant 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 4(o) of the Transaction Agreement, the Company
acknowledges that such aforementioned hedging and/or trading activities do not
constitute a breach of this Agreement or any other Exchange Document or any of
the documents executed in connection herewith or therewith.
 
(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 the Holder’s request. The
Common Shares do not derive, and have not at any time during the previous five
years derived, directly or indirectly more than 50% of its fair market value
from one or any combination of: (i) real property situated in Canada, (ii)
Canadian resource property and (iii) timber resource properties (as such terms
are defined for purposes of the Income Tax Act (Canada).
 
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(ii) Registration Eligibility. The Company is eligible to register the
Registrable Securities for resale by the Holder using Form S-3 promulgated under
the 1933 Act.
 
(jj) Shell Company Status. The Company is not, and has never been, an issuer
identified in Rule 144(i)(1).
 
(kk) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the issuance of the Securities to be acquired by the Holder will be, or
will have been, fully paid or provided for by the Company, and all laws imposing
such taxes will be or will have been complied with.
 
(ll) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries
is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and
to regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its Subsidiaries or
affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any equity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
 
(mm) Disclosure. The Company confirms that neither it nor any other Person
acting on its behalf has provided the Holder or any of its agents or counsel
with any information that constitutes or could reasonably be expected to
constitute material, nonpublic information. The Company understands and confirms
that the Holder will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Holder
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 the Holder is not making and
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.
 
(nn) Ranking of Notes. No Indebtedness of the Company or any of the
Subsidiaries, at the Closing, will be senior to, or pari passu with, the Notes
in right of payment, whether with respect to payment or redemptions, interest,
damages, upon liquidation or dissolution or otherwise.
 
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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) Blue Sky. If required by applicable law, 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
issuance to the Holder 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 Holder on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and issuance of
the Securities required under applicable securities or “Blue Sky” laws of the
states of the United States following the Closing Date.
 
(c) Listing. The Company shall promptly secure the listing of all of the
Registrable Securities (as defined in the Amended 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 Exchange 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(c).
 
(d) Fees. [For Magnetar: The Company shall reimburse the Holder or its
designee(s) (in addition to any other expense amounts paid to the Holder 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
Exchange Documents (including, without limitation, all reasonable legal fees and
disbursements in connection therewith, documentation and implementation of the
transactions contemplated by the Exchange Documents and due diligence in
connection therewith), which amount shall be paid by the Company by wire
transfer of immediately available funds at the Closing or upon termination of
this Agreement so long as such termination did not occur as a result of a
material breach by the Holder of any of its obligations hereunder (as the case
may be), provided that if the Closing occurs, up to $30,000 of such costs and
expenses shall be paid by the Company in cash and the aggregate amount of any
such costs and expenses in excess of $30,000 shall be added to the original
principal amount of the Note issued to the Holder. 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 the Holder)
relating to or arising out of the transactions contemplated hereby. The Company
shall pay, and hold the Holder harmless against, any liability, loss or expense
(including, without limitation, reasonable attorneys’ fees and out-of-pocket
expenses) arising in connection with any claim relating to any such payment.]
[For Other Investors: Each of the Company and the Holder shall bear its own
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, 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 the
Holder) relating to or arising out of the transactions contemplated hereby, and
the Company shall pay, and hold the Holder harmless against, any liability, loss
or expense (including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment.]
 
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(e) 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 the Holder 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 if the Holders effects a pledge of Securities it shall
not 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 Exchange
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 the Holder.
 
(f) Disclosure of Transactions and Other Material Information. The Company
shall, on or before 8:30 a.m., New York time, on the first (1st) Business Day
after the date of this Agreement, issue a press release (the “Press Release”)
reasonably acceptable to the Holder disclosing all the material terms of the
transactions contemplated by the Exchange Documents. On or before 8:30 a.m., New
York 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 Exchange Documents in
the form required by the 1934 Act and attaching all the material Exchange
Documents (including, without limitation, this Agreement (and all schedules to
this Agreement), the form of the Note, the form of Warrant and the Amended
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 the Holder 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 Exchange 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 the Holder 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 the Holder. If the Holder 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, the Holder shall
provide the Company with written notice thereof in which case the Company shall,
within two (2) Trading Days (as defined below) 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 the Holder), in addition to any other remedy provided herein or in
the other Exchange Documents, the Holder 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. The Holder shall not 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 the Holder 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 the Holder, 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) the Holder 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 the Holder, the Company shall not (and shall cause each
of the Subsidiaries to not) disclose the name of the Holder in any filing,
announcement, release or otherwise unless required by applicable law or
regulations.
 
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(g) Amendment of Transaction Agreement. From and after the Closing: 
 
(i) The term “Conversion Shares” in the Transaction Agreement is hereby deleted.
 
(ii) The term “Registration Rights Agreement” in the Transaction Agreement is
hereby replaced with the term “Amended Registration Rights Agreement.”
 
(iii) The defined term “Securities” in the Transaction Agreement is hereby
replaced with the following: ““Securities” means, collectively, the Notes, the
2008 Warrants and the 2008 Warrant Shares.” Notwithstanding anything in this
Section 4(g) to the contrary, for purposes of Section 4(d) and 9(k) of the
Transaction Agreement, the terms “Securities” and “Transaction Documents” shall
each have the meaning ascribed to such terms prior to the amendment contemplated
by this Agreement and the Other Exchange Agreements.
 
(iv) The term “Special Warrants” in the Transaction Agreement is hereby replaced
with the term “Notes.”
 
(v) The term “Warrants” in the Transaction Agreement is hereby replaced with the
term “2008 Warrants.”
 
(vi) The term “Warrant Shares” in the Transaction Agreement is hereby replaced
with the term “2008 Warrant Shares.”
 
(vii) The following terms are hereby added to the Transaction Agreement:
 
(1) “2008 Warrants” means all of the warrants issued by the Company in exchange
for Warrants, and shall include all warrants issued in exchange therefor or
replacement thereof.
 
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(2) “2008 Warrant Shares” means all of the Common Shares issuable upon exercise
of the 2008 Warrants.
 
(3) “Notes” means all of the senior secured notes issued by the Company in
exchange for Special Warrants, and shall include all senior secured notes issued
in exchange therefor or replacement thereof.
 
(4) “Special Warrants” means all of the special warrants issued to the Buyers on
the Closing Date.
 
(5) “Warrants” means all of the warrants (other than Special Warrants) issued to
the Buyers on the Closing Date.
 
(viii) Section 4(p)(i) of the Transaction Agreement is hereby replaced with the
following:
 
“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 principal amount of the Notes issued in exchange for the Special
Warrants acquired 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”).”
 
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(ix) Except as otherwise expressly provided herein, (i) the Transaction
Agreement and each other Transaction Document is, and shall continue to be, in
full force and effect and is hereby ratified and confirmed in all respects,
except that on and after the Closing Date (A) all references in the Transaction
Agreement to the “Transaction Agreement,” “hereto,” “hereof,” “this Agreement,”
“hereunder” or words of like import referring to the Transaction Agreement shall
mean the Transaction Agreement as amended by this Agreement and the Other
Exchange Agreements, and (B) all references in the other Transaction Documents
to the “Transaction Agreement,” “thereto,” “thereof,” “thereunder” or words of
like import referring to the Transaction Agreement shall mean the Transaction
Agreement as amended by this Agreement and the Other Exchange Agreements, and
(ii) the execution, delivery and effectiveness of this Agreement shall not
operate as an amendment of any right, power or remedy of the Holder under any
Transaction Document, nor constitute an amendment of any provision of any
Transaction Document and all of them shall continue in full force and effect, as
amended or modified by this Agreement and the Other Exchange Agreements. For
purposes of this Agreement, (1) “Other Special Warrant Holders” means,
collectively, the holders (other than the Holder) of special warrants acquired
pursuant to the Transaction Agreement; (2) “Other Exchange Agreements” means,
collectively, the separate exchange agreements, each dated as of August 29,
2008, entered into between the Company and each of the Other Special Warrant
Holders; (3) “Other Notes” means, collectively, the senior secured notes issued
pursuant to the Other Exchange Agreements, and shall include all senior secured
notes issued in exchange therefor or replacement thereof; (4) “Notes” means,
collectively, the Note and the Other Notes; (5) “Other Warrants” means,
collectively, the warrants issued pursuant to the Other Exchange Agreements, and
shall include all warrants issued in exchange therefor or replacement thereof;
(6) “2008 Warrants” means, collectively, the Warrant and the Other Warrants; and
(7) “Other Exchange Documents” means, collectively, the Other Exchange
Agreements, the Other Notes, the Other Warrants and all other agreements,
documents and instruments executed and delivered in connection with the
transactions contemplated thereby.
 
(x) It is expressly understood and agreed that the Note (or any portion thereof)
may be used by the Holder as purchase price to purchase any securities of the
Company, whether pursuant to Section 4(p)(i) of the Transaction Agreement or
otherwise.
 
(h) Rule 144. The Company expressly acknowledges and agrees that for purposes of
Rule 144(d) the Holder shall be deemed to have acquired the Warrant on August 3,
2007 and that the holding period for it may be tacked onto the holding period of
the 2007 Warrant. The Company agrees that it shall not (and shall cause each of
its officers, directors, employees and agents to not) take any action or omit to
take any action inconsistent with the foregoing. The Company further agrees to
take all actions necessary (including, without limitation, the issuance by its
legal counsel of any necessary legal opinions) to issue to the Warrant Shares so
that (subject to the Company being compliant with Section 144(c)(1) only if the
Holder becomes an affiliate of the Company after the date hereof) they are
immediately freely tradable on an Eligible Market without restriction and not
containing any restrictive legend, all without the need for any action by the
Holder.
 
(i) Registration Delay Payments. Effective simultaneously with the Holder’s
receipt of the Note and Warrant, the Holder hereby waives (i) all Registration
Delay Payments accrued and owing to the Holder under the Registration Rights
Agreement and (ii) the Effectiveness Failure (as defined in the Registration
Rights Agreement) that occurred prior to the date hereof under Section 2(e) of
the Registration Rights Agreement as a result of the failure of the Registration
Statement (as defined in the Registration Rights Agreement) initially filed by
the Company with the SEC on September 11, 2007 to be declared effective by the
SEC on or before the Effectiveness Deadline (as defined in the Registration
Rights Agreement) for such Registration Statement.
 
(j) Existing Triggering Events; Existing Payment Breach. Effective
simultaneously with the Holder’s receipt of the Note and Warrant, the Holder
hereby waives all Existing Trigger Events and the Existing Payment Breach (each
as defined in that certain Forbearance Agreement, dated as of April 14, 2008, by
and between the Company and the Holder). Without implication that the contrary
would otherwise be true, it is expressly understood and agreed that Sections
4(i) and 4(j) shall be null and void ab initio and be of no force or effect if
the Closing does not occur and this Agreement is terminated pursuant to Section
8 hereof.
 
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(k) Issuance of Notes and 2008 Warrants. Effective simultaneously with the
Closing, the Holder hereby consents, under Sections 4(k) and 4(n) of the
Transaction Agreement, to the issuance of the Notes and 2008 Warrants and the
Common Shares issuable upon exercise of the 2008 Warrants.
 
(l) Public Information. At any time during the period commencing on the Closing
Date and ending at such time that all of the Securities have been sold, if a
registration statement is not available for the resale of all of the Securities
and the Company shall fail for any reason to satisfy the current public
information requirement under Rule 144(c)(1) and the Securities cannot then be
sold without the requirement for the Company to be in compliance with Rule
144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144
(a “Public Information Failure”), then, as partial relief for the damages to any
holder of Securities by reason of any such delay in or reduction of its ability
to sell the Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each such
holder an amount in cash equal to one percent (1%) of the original principal
amount of the Note on the day of a Public Information Failure and on every
thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (i) the date such Public Information Failure is cured and
(ii) such time that such public information is no longer required pursuant to
Rule 144. The payments to which a holder shall be entitled pursuant to this
Section 4(l) are referred to herein as “Public Information Failure Payments.”
Following the initial Public Information Failure Payment for a Public
Information Failure (which shall be paid on the date of such Public Information
Failure, as set forth above), without limiting the foregoing, if a failure
giving rise to such Public Information Failure Payment is cured or such public
information is no longer required (as the case may be) prior to any thirtieth
(30th) day anniversary of such Public Information Failure, then such Public
Information Failure Payment shall be paid on the third (3rd) Business Day after
such cure or such public information is no longer required (as the case may be).
 
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(m) Shareholder Approval. To the extent required by the rules and regulations of
the Principal Market, the Company shall provide each shareholder entitled to
vote at a special or annual meeting of shareholders of the Company (the
“Shareholder Meeting”), which shall be called and held not later than one
hundred eighty (180) days after the Closing Date (the “Shareholder Meeting
Deadline”), a proxy statement, in the form which has been previously reviewed by
the Holder and its counsel, soliciting each such shareholder’s affirmative vote
at the Shareholder Meeting for approval of resolutions providing for the
Company’s issuance of all of the Securities as described in the Exchange
Documents in accordance with applicable law and the rules and regulations of
Principal Market (such affirmative approval being referred to herein as the
“Shareholder Approval” and the date of such Shareholder Approval shall be
referred to as the “Shareholder Approval Date”), and the Company shall use its
commercially reasonable efforts to solicit its shareholders’ approval of such
resolutions (which efforts shall include, without limitation, the requirement to
hire a reputable proxy solicitor) and to cause the board of directors of the
Company to recommend to the shareholders that they approve such resolutions. If
the Company shall be obligated to seek to obtain the Shareholder Approval, then
it shall do so by the Shareholder Meeting Deadline. If, despite the Company’s
commercially reasonable efforts the Shareholder Approval is not obtained on or
prior to the Shareholder Meeting Deadline, the Company shall cause an additional
Shareholder Meeting to be held each semi-annual period thereafter until such
Shareholder Approval is obtained or until such Shareholder Approval is no longer
required under the rules and regulations of the Principal Market or is no longer
required to eliminate restrictions on the issuance of Common Shares pursuant to
the 2008 Warrants. The Company shall not directly or indirectly take any action
which would result in a Dilutive Issuance (as defined in the Warrant) below the
Floor Price (as defined in the Warrant) prior to the Shareholder Approval Date.
The Company agrees that any such action and resulting Dilutive Issuance shall be
null and void and that the Holder would be irreparably harmed to the extent that
the Company takes any such action.
 
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 Note and the Warrant in which the
Company shall record the name and address of the Person in whose name the Note
and the Warrant have been issued (including the name and address of each
transferee), the principal amount of the Note held by such Person and the number
of Warrant Shares issuable upon exercise of the Warrant held by such Person. The
Company shall keep the register open and available at all times during business
hours for inspection of the Holder or its legal representatives.
 
(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 the Holder (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 the
Holder or its respective nominee(s), for the Warrant Shares in such amounts as
specified from time to time by the Holder to the Company upon exercise of the
Warrant. 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 Exchange
Documents. If the Holder effects a sale, assignment or transfer of the
Securities in accordance with Section 2(g) hereof, 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 the Holder to effect such sale,
transfer or assignment. In the event that such sale, assignment or transfer
involves 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 Holder, 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 the Holder. 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 the Holder 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 the earlier of each Effective Date (as defined in
the Amended Registration Rights Agreement) or the date on which the Securities
are eligible to be sold pursuant to Rule 144. 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.
 
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(c) Legends. The Holder understands that the certificates or other instruments
representing the Warrant and, until such time as the resale of the Warrant
Shares have been registered under the 1933 Act as contemplated by the Amended
Registration Rights Agreement or are eligible for sale pursuant to Rule 144, the
stock certificates representing 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):
 
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [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
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING 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.
 
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(d) Removal of Legends. Certificates evidencing the Warrant and 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 1933
Act and the Holder indicates in its exercise notice that it intends to,
immediately following such exercise, sell the number of Warrant Shares specified
in such notice under such Registration Statement, (ii) following any sale of
such Securities pursuant to Rule 144 (assuming that the transferor is not an
affiliate of the Company), (iii) if such Securities are eligible to be sold,
assigned or transferred under Rule 144 (provided that the Holder provides the
Company with reasonable assurances that such Securities are eligible for sale,
assignment or transfer under Rule 144, which shall not include an opinion of
counsel), (iv) in connection with a sale, assignment or other transfer (other
than under Rule 144) provided the Holder provides the Company with an opinion of
counsel to the Holder, in a generally acceptable form, to the effect that such
sale, assignment or transfer of such 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 (as defined below) following the
delivery by the Holder 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 the Holder as may be required above in this
Section 5(d), as directed by the Holder, either: (A) deliver (or cause to be
delivered to) the Holder a certificate representing such Securities that is free
from all restrictive and other legends or (B) credit the balance account of the
Holder’s or the Holder’s nominee with DTC with a number of Common Shares equal
to the number of Warrant Shares represented by the certificate or exercise
notice (as the case may be) so delivered by the Holder (the date by which such
certificate is required to be delivered to the Holder or such credit is so
required to be made to the balance account of the Holder’s or the Holder’s
nominee with DTC pursuant to the foregoing is referred to herein as the
“Required Delivery Date”).
 
(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 the Holder by the
Required Delivery Date a certificate representing the Securities required to be
so delivered by the Company to the Holder that is free from all restrictive and
other legends or (ii) credit the balance account of the Holder’s or the Holder’s
nominee with DTC for such number of Warrant Shares required to be so delivered
by the Company, then, in addition to all other remedies available to the Holder,
the Company shall pay in cash to the Holder 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 original principal amount of the Note. In addition
to the foregoing, if the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of the Holder’s or the
Holder’s nominee with DTC by the Required Delivery Date, and if on or after the
Required Delivery Date the Holder purchases (in an open market transaction or
otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of
Common Shares that the Holder anticipated receiving from the Company without any
restrictive legend (a “Buy-In”), then the Company shall, within three (3)
Trading Days after the Holder’s request and in the Holder’s sole discretion,
either (i) pay cash to the Holder in an amount equal to the Holder’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 the Holder’s balance account shall terminate
and such shares shall be cancelled, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates or credit the Holder’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 the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Warrant Shares that the Company was required to
deliver to the Holder by the Required Delivery Date times (B) the average of the
VWAP of the Common Shares for the five (5) Trading Day period immediately
preceding the Required Delivery Date.
 
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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 time, and ending at 4:00:00 p.m., New York
time, as reported by Bloomberg Financial Markets (“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 time, and ending at 4:00:00 p.m., New York 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 Holder. If the Company and the Holder 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. “Trading Day” means any day on which the Common Shares are traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Shares, then on the principal securities exchange or
securities market on which the Common Shares are then traded; provided that
“Trading Day” shall not include any day on which the Common Shares are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Shares are suspended from trading during the final hour of trading on
such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York time).
 
6.
CONDITIONS TO THE COMPANY’S OBLIGATION TO EXCHANGE AND ISSUE.

 
(a) The obligation of the Company hereunder to exchange and issue the Note and
the Warrant to the Holder 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 the Holder with prior
written notice thereof:
 
(i) The Holder shall have executed each of the Exchange Documents to which it is
a party and delivered the same to the Company.
 
(ii) The Holder shall have delivered to the Company its Special Warrant and 2007
Warrant.
 
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(iii) The representations and warranties of the Holder 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 the Holder 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 the Holder at or prior
to the Closing Date.
 
7.
CONDITIONS TO HOLDER’S OBLIGATION TO EXCHANGE. 

 
(a) The obligation of the Holder hereunder to exchange its Special Warrant and
2007 Warrant 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 Holder’s sole benefit and may be waived by the Holder 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 the Holder each of the
Exchange Documents to which it is a party, including the Note and the Warrant.
 
(ii) Each Subsidiary shall have duly executed and delivered to the Holder each
of the Exchange Documents to which it is a party.
 
(iii) The Holder 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 the Holder.
 
(iv) The Company shall have delivered to the Holder a copy of the Irrevocable
Transfer Agent Instructions, in form reasonably acceptable to the Holder, which
instructions shall have been delivered to and acknowledged in writing by the
Company’s transfer agent.
 
(v) The Company shall have delivered to the Holder a certificate evidencing the
formation and good standing of the Company and each Subsidiary in 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.
 
(vi) The Company shall have delivered to the Holder 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.
 
(vii) The Company shall have delivered to the Holder a certificate evidencing
the qualification of each Subsidiary as a foreign corporation and good standing
issued by the Secretary of State (or comparable office) of each jurisdiction in
which each Subsidiary conducts business and is required to so qualify, as of a
date within ten (10) days of the Closing Date.
 
(viii) The Company shall have delivered to the Holder a certified copy of the
Articles of Incorporation within ten (10) days of the Closing Date.
 
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(ix) The Company shall have delivered to the Holder a certificate, executed by
the Secretary of the Company and each Subsidiary and dated as of the Closing
Date, as to (i) the resolutions consistent with Section 3(b) as adopted by the
Company’s or such Subsidiary’s (as the case may be) board of directors in a form
reasonably acceptable to the Holder, (ii) the Articles of Incorporation or its
other constituent documents (as the case may be) and (iii) the Bylaws or its
bylaws (as the case may be), each as in effect at the Closing, in form
reasonably acceptable to the Holder.
 
(x) 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 (and the Company shall have caused each Subsidiary to 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
or such Subsidiary (as the case may be) at or prior to the Closing Date. The
Holder 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 the Holder in
form reasonably acceptable to the Holder.
 
(xi) The Company shall have delivered to the Holder a letter from the Company’s
transfer agent certifying the number of Common Shares outstanding on the Closing
Date immediately prior to the Closing.
 
(xii) 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.
 
(xiii) The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the issuance of the
Securities, including without limitation, those required by the Principal
Market.
 
(xiv) 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 Exchange Documents.
 
(xv) 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.
 
(xvi) The Company shall have obtained approval of the Principal Market to list
the Conversion Shares and the Warrant Shares.
 
(xvii) The Company shall have delivered to the Holder appropriate financing
statements on Form UCC-1 or PPSA filings (as the case may be) to be duly filed
in such office or offices as may be necessary or, in the opinion of the Holder,
desirable to perfect the security interests purported to be created by each
Security Document.
 
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(xviii) The results of UCC searches, and searches for any tax or judgment lien
filed against the Company or any of the Subsidiaries or any of its or their
respective property, shall not show any Liens (as defined in the Note) on any of
the Collateral (as defined in the Security Agreement).
 
(xix) Each of the Other Special Warrant Holders shall have (i) executed the
Other Exchange Agreements, (ii) satisfied or waived all conditions to the
closings contemplated by such agreements and (iii) surrendered their Special
Warrants and 2007 Warrants being exchanged at the Closing.
 
(xx) The Company shall have amended the Registration Rights Agreement in the
form attached hereto as Exhibit E (the “Amended Registration Rights Agreement”).
 
(xxi) The Company shall have delivered to the Holder such other documents
relating to the transactions contemplated by this Agreement as the Holder or its
counsel may reasonably request.
 
8.
TERMINATION. 

 
In the event that the Closing shall not have occurred on or before twenty (20)
days from the date hereof due to the Company’s or the Holder’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, notwithstanding any such termination the Company shall remain
obligated to reimburse the Holder (if the Holder is a non-breaching party) in
cash for all the expenses described in Section 4(d) 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
Exchange 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 Exchange Documents.
 
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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 TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
(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 the Holder’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. Notwithstanding anything to the contrary
contained in this Agreement or any other Exchange Document (and without
implication that the following is required or applicable), it is the intention
of the parties that in no event shall amounts and value paid by the Company
and/or the Subsidiaries (as the case may be), or payable to or received by the
Holder, under the Exchange Documents, including without limitation, any amounts
that would be characterized as “interest” under applicable law (including,
without limitation, any applicable Canadian or Ontario law), exceed amounts
permitted under any such applicable law. Accordingly, if any obligation to pay,
payment made to the Holder, or collection by the Holder pursuant the Exchange
Documents is finally judicially determined to be contrary to any such applicable
law, such obligation to pay, payment or collection shall be deemed to have been
made by mutual mistake of the Holder, the Company and the Subsidiaries and such
amount shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest, as the case may be, as would not be so
prohibited by the applicable law. Such adjustment shall be effected, to the
extent necessary, by reducing or refunding, at the option of the Holder, the
amount of interest or any other amounts which would constitute unlawful amounts
required to be paid or actually paid to the Holder under the Exchange Documents.
For greater certainty, to the extent that any interest, charges, fees, expenses
or other amounts required to be paid to or received by the Holder under any of
the Exchange Documents or related thereto are held to be within the meaning of
“interest” or another applicable term to otherwise be violative of applicable
law, such amounts shall be pro-rated over the period of time to which they
relate.
 
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(e) Entire Agreement; Amendments. This Agreement, the other Exchange 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 Holder, the Company, their affiliates and Persons acting
on their behalf with respect to the matters contained herein and therein
(provided that (i) except as expressly contemplated elsewhere in this Agreement,
the foregoing shall not have any effect on any agreements the Holder has entered
into with the Company or any of its Subsidiaries prior to the date hereof, (ii)
Section 4(c) hereof supersedes Section 4(f) of the Transaction Agreement in its
entirety, (iii) Section 4(e) hereof supersedes Section 4(h) of the Transaction
Agreement in its entirety and (iv) Section 5 hereof supersedes Section 5 of the
Transaction Agreement in its entirety), and this Agreement, the other Exchange
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 the Holder
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 Holder, provided that any
party may give a waiver in writing as to itself. 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 Other Exchange Documents unless the same
consideration also is offered to the Holder. [For Other Investors: Except for
the Company’s agreement to pay legal fees and expenses of an Other Special
Warrant Holder pursuant to the Other Exchange Agreement between the Company and
such Other Special Warrant Holders, t] [For Magnetar: T]he Company has not,
directly or indirectly, made any agreements with any other Person relating to
the terms or conditions of the transactions contemplated by the Other Exchange
Documents which differs in any respect from the terms and conditions set forth
in the Exchange Documents. Without limiting the foregoing, the Company confirms
that the Holder has made not any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or otherwise.
 
(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 in accordance with the provisions of
Section 9(f) of the Transaction Agreement. A copy of all notices (for
informational purposes only) sent to the Holder shall also be sent to:
 
____________________________________
____________________________________
____________________________________
Telephone:
________________________
Facsimile:
________________________
Attention:
________________________

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(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 Holder, including, without limitation, by way of a Fundamental
Transaction (as defined in the Note and the Warrant) (unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Note and the Warrant). The Holder 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
Holder 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).
 
(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.
 
(j) Further Assurances. Each party shall (and the Company shall cause each
Subsidiary to) 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 the Holder’s execution and delivery of
the Exchange Documents to which it is a party and acquiring the Securities
thereunder and in addition to all of the Company’s and the Subsidiaries’ other
obligations under the Exchange Documents, the Company shall defend, protect,
indemnify and hold harmless the Holder and each affiliate of the Holder 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 or any Subsidiary in any of the
Exchange Documents, (b) any breach of any covenant, agreement or obligation of
the Company or any Subsidiary contained in any of the Exchange 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 or any Subsidiary) and arising out of or resulting from (i) the
execution, delivery, performance or enforcement of any of the Exchange
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 the Holder pursuant to Section 4(f) or
(iv) the status of the Holder or holder of the Securities as an investor in the
Company pursuant to the transactions contemplated by the Exchange Documents,
except, with respect to clause (c) above, to the extent (but only to the extent)
such Indemnified Liability arises from the Holder’s 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 Amended
Registration Rights Agreement.
 
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(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. The Holder and each affiliate of the Holder that holds any
Securities shall have all rights and remedies set forth in the Exchange
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 or any Subsidiary
fails to perform, observe, or discharge any or all of its or their obligations
under any of the Exchange Documents, any remedy at law may prove to be
inadequate relief to the Holder. The Company therefore agrees, on behalf of
itself and each Subsidiary, that the Holder 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.
 
(n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Exchange Documents, whenever the
Holder exercises a right, election, demand or option under an Exchange Document
and the Company or any Subsidiary does not timely perform its related
obligations within the periods therein provided, then the Holder may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company or such Subsidiary (as the case may be), any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights
 
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(o) Payment Set Aside. To the extent that the Company or any Subsidiary makes a
payment or payments to the Holder hereunder or pursuant to any of the other
Exchange Documents or the Holder enforces or exercises its 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 or any
Subsidiary, 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. Unless otherwise expressly
indicated, all dollar amounts referred to in this Agreement and the other
Exchange Documents are in United States Dollars (“US Dollars”), and all amounts
owing under this Agreement and all other Transaction Documents shall be paid in
US Dollars. All amounts denominated in other currencies shall be converted in
the US Dollar equivalent amount in accordance with the Exchange Rate on the date
of calculation. “Exchange Rate” means, in relation to any amount of currency to
be converted into US Dollars pursuant to this Agreement, the US Dollar exchange
rate as published in the Wall Street Journal on the relevant date of
calculation.
 
(p) Independent Nature of the Holder’s Obligations and Rights. The obligations
of the Holder under the Exchange Documents are several and not joint with the
obligations of any Other Special Warrant Holder under the Other Exchange
Documents, and the Holder shall not be responsible in any way for the
performance of the obligations of any Other Special Warrant Holders under any
Other Exchange Documents. Nothing contained herein or in any other Exchange
Document, and no action taken by the Holder pursuant hereto or any Other Special
Warrant Holder pursuant to any Other Exchange Documents, shall be deemed to
constitute the Holder or any Other Special Warrant Holder as, and the Company
acknowledges that the Holder and the Other Special Warrant Holders do not so
constitute, a partnership, an association, a joint venture or any other kind of
group or entity, or create a presumption that the Holder and any Other Special
Warrant Holder are in any way acting in concert or as a group or entity with
respect to such obligations or the transactions contemplated by the Exchange
Documents, the Other Exchange Documents or any matters, and the Company
acknowledges that the Holder and the Other Special Warrant Holders are not
acting in concert or as a group or entity, and the Company shall not assert any
such claim, with respect to such obligations or the transactions contemplated by
the Exchange Documents and the Other Exchange Documents. The decision of the
Holder to acquire the Securities pursuant to the Exchange Documents has been
made by the Holder independently of any Other Special Warrant Holder. The Holder
acknowledges that no Other Special Warrant Holder has acted as agent for the
Holder in connection with the Holder making its acquisition hereunder and that
no Other Special Warrant Holder will be acting as agent of the Holder in
connection with monitoring the Holder’s Securities or enforcing its rights under
the Exchange Documents. The Company and the Holder confirms that the Holder has
independently participated with the Company and the Subsidiaries in the
negotiation of the transaction contemplated hereby with the advice of its own
counsel and advisors. The Holder shall be entitled to independently protect and
enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any of the other Exchange Documents, and it shall not
be necessary for any Other Special Warrant Holder to be joined as an additional
party in any proceeding for such purpose. To the extent that any of the Other
Special Warrant Holders and the Company enter into the same or similar
documents, all such matters are solely in the control of the Company and the
Subsidiaries, not the action or decision of the Holder, and would be solely for
the convenience of the Company and the Subsidiaries and not because it was
required or requested to do so by the Holder or any Other Special Warrant
Holder. For clarification purposes only and without implication that the
contrary would otherwise be true, the transactions contemplated by the Exchange
Documents include only the transaction between the Company and the Holder and do
not include any other transaction between the Company and any Other Special
Warrant Holder.
 
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(q) Delivery of Securities. Notwithstanding anything contained in this Agreement
or any other Exchange Document to the contrary, unless otherwise directed in
writing by the Holder or if being credited to the applicable balance accounts at
DTC, the Company shall, and shall cause its agents and representatives to,
deliver all of the Holder’s securities acquired pursuant to this Agreement (and
all securities which are issuable to the Holder pursuant to the terms of this
Agreement or any other Exchange Document) to the address for delivery of
securities set forth on the Holder’s signature page to this Agreement, and
copies of the certificates representing such securities shall be sent to the
Holder to the address of the Holder as set forth on the Holder’s signature page
to this Agreement.
 
(r) Most Favored Nation. The Company hereby represents and warrants as of the
date hereof and covenants and agrees from and after the date hereof that none of
the terms offered to any Person with respect to any amendment or waiver (each an
“Amendment”) relating to the terms, conditions and transactions contemplated by
any Exchange Document or any Other Exchange Document is or will be more
favorable to such Person than those of the Holder, and, if they are or become
more favorable to any other Person, this Agreement and the other Exchange
Documents shall be, without any further action by the Holder or the Company,
deemed amended and modified in an economically and legally equivalent manner
such that the Holder shall receive the benefit of the more favorable terms
contained in such Amendment. Notwithstanding the foregoing, the Company agrees,
at its expense, to take such other actions (such as entering into amendments to
the Exchange Documents and the Transaction Documents) as the Holder may
reasonably request to further effectuate the foregoing. Notwithstanding the
foregoing, the foregoing provisions shall not apply to any settlement with any
Person that arises from or is entered into in connection with the settlement or
disposition of a dispute with or claim by such Person.
 
[signature pages follow]
 
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IN WITNESS WHEREOF, the Holder 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:
   
 
Name: 
   
 
Title:  
   

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

 
HOLDER:
 
   
 
 
 
 
By:
 
Its:

 
ADDRESS FOR DELIVERY OF SECURITIES:
 
  
     
Attention:
 

 

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EXHIBITS
 

Exhibit A
Form of Note

Exhibit B  Form of Warrant 

Exhibit C  Form of Guaranty 

Exhibit D  Form of Security Agreement 

Exhibit E  Form of Amended Registration Rights Agreement 

 

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