Document:

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                                                                   EXHIBIT 10.2
                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (this "AGREEMENT"),  made and entered into this
31st day of January,  2003,  is by and among  MICHAEL  MULLARKEY,  an individual
("LENDER"),  WORKSTREAM  INC.,  a  corporation  formed  under the laws of Canada
("WORKSTREAM"  and as agent for the Companies (as defined  below),  the "COMPANY
AGENT"),  and each company set forth on EXHIBIT A hereto  (each a "COMPANY"  and
collectively the "COMPANIES").

                                   BACKGROUND

         WHEREAS,  simultaneously  with  the  execution  and  delivery  of  this
Agreement,  Workstream and the Companies have executed and delivered to Lender a
$1,287,901.04 Term Note dated January 31, 2003 (the "NOTE"); and

         WHEREAS,  in order to secure the payment of the Companies'  obligations
under the Note, the Lender has requested, and the Companies have agreed to grant
to Lender, a security interest in certain assets of the Companies.

                                    AGREEMENT

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

         1. GENERAL MATTERS.

                  (a) GENERAL DEFINITIONS;  CURRENCY.  Capitalized terms used in
this Agreement shall have the meanings  assigned to them in EXHIBIT B. All other
terms used but not otherwise  defined in this Agreement but which are defined in
the UCC,  shall  have the  meaning  given to such  terms in the UCC  unless  the
context clearly requires otherwise. All units of currency used in this Agreement
shall be references to the lawful money of the United States of America.

                  (b) RULES OF  CONSTRUCTION.  All schedules,  addenda,  annexes
exhibits and  Disclosure  Letters  expressly  identified  to this  Agreement are
incorporated  herein  by  reference  and  taken  together  with  this  Agreement
constitute but a single agreement.  The words "herein",  hereof" and "hereunder"
or other words of similar import refer to this  Agreement as a whole,  including
the exhibits, addenda, annexes, schedules and Disclosure Letters as the same may
be from time to time amended, modified, restated or supplemented, and not to any
particular section,  subsection or clause contained in this Agreement.  Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural,  and pronouns stated in the
masculine,  feminine or neuter gender shall include the masculine,  the feminine
and the neuter.  The term "or" is not exclusive.  The term  "including"  (or any
form thereof) shall not be limiting or exclusive. All references to statutes and
related  regulations  shall  include any  amendments  of same and any  successor
statutes and  regulations.  All references in this Agreement or in the schedule,
addenda,  annex,  and  exhibit  and  Disclosure  Letters  to this  Agreement  to
sections,  schedules,  Disclosure Letters, exhibits, and attachments shall refer
to the corresponding  sections,  schedules,  Disclosure Letters,  exhibits,  and
attachments  of or to  this  Agreement.  Each  matter  set  forth  in any of the
schedules or Disclosure  Letters shall be deemed to be disclosed for purposes of
every  other  schedule,  addenda,  annex,  exhibit  or  Disclosure  Letter.  All
references  to any  instruments  or  agreements,  including  references  to this
Agreement, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof.

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         2. SECURITY INTEREST.

                  (a) To secure the payment of the  amounts due to Lender  under
the Note (collectively, the "OBLIGATIONS"), each Company hereby grants to Lender
a security  interest in all now owned or  hereinafter  acquired  (i)  Inventory,
Equipment,  and Books and Records  owned by such  Company and all  products  and
Proceeds  thereof (the "FIXED  COLLATERAL"),  and (ii)  Accounts of such Company
(the  "ACCOUNT  Collateral",   and  together  with  the  Fixed  Collateral,  the
"COLLATERAL") and all products and Proceeds thereof.

                  (b) Upon the  occurrence  and  during the  continuation  of an
Event of Default,  each Company hereby assigns to Lender, as additional security
for the payment of the  Obligations,  all proceeds of insurance due or to become
due after the  occurrence  of the Event of Default under any and all policies of
insurance now or at any time hereafter  covering the Collateral  (the "INSURANCE
PROCEEDS").  Subject to the remaining terms of this Paragraph 2(b), each Company
hereby  directs  the  issuer of any such  policy to pay all  Insurance  Proceeds
directly to Lender.  The foregoing  notwithstanding,  if prior to the payment of
any Insurance Proceeds, the Company Agent delivers written notice to Lender that
the Insurance  Proceeds will be used to replace the  Collateral  which was lost,
stolen,  destroyed  or  otherwise  subject  to a  casualty,  then the  foregoing
assignment  shall not be  effective  and the  applicable  insurer  shall pay the
Insurance  Proceeds  directly to the  Companies;  PROVIDED  that such  Insurance
Proceeds  shall only be used by the  Companies  to replace  the lost,  stolen or
destroyed Collateral and any Insurance Proceeds not used for such purposes shall
be paid to Lender in satisfaction of any Obligations then  outstanding.  Subject
to the  terms  of this  Paragraph  2(b),  upon the  occurrence  and  during  the
continuation  of an event of an Event of Default,  Lender may (but need not), in
Lender' name or in Companies' names, execute and deliver proof of claim, receive
all Insurance  Proceeds,  and endorse checks and other instruments  representing
payment of Insurance Proceeds.

                  (c)  Each  Company  hereby   authorizes  Lender  to  file  any
financing  statements,  continuation  statements or amendments  thereto that (x)
describe the  Collateral  as set forth in Section 2(a) and (y) contain any other
information  required by Part 5 of Article 9 of the UCC for the  sufficiency  or
filing office acceptance of any financing statement,  continuation  statement or
amendment.  Each  Company  acknowledges  that it is not  authorized  to file any
financing  statement or amendment or  termination  statement with respect to any
financing  statement  covering any or all of the  Collateral,  without the prior
written consent of Lender (which consent shall not be  unreasonably  withheld or
delayed),  subject to Companies' rights under Section 9-509(d)(2) of the UCC and
provided  that the foregoing  restriction  shall be  inapplicable  following the
satisfaction in full of the Obligations.

         3.  REPRESENTATIONS  AND  WARRANTIES  OF THE  COMPANIES.  Each Company,
severally and not jointly, hereby represents and warrants to Lender as follows:

                  (a) Each  Company  is an  entity  duly  incorporated,  in good
standing  and  having  a  legal  corporate  existence  under  the  laws  of  the
jurisdiction of its incorporation, and is duly qualified and in good standing in
every  jurisdiction in which the nature of such Company's business requires such
qualification  except where the failure to be so qualified  and in good standing
would not reasonably be likely to result in a Material Adverse Effect.

                  (b) The execution,  delivery and performance of this Agreement
(i) has been duly authorized by all necessary corporate actions,  (ii) is not in
contravention of such Company's certificate or articles of incorporation, bylaws
or any material  indenture,  agreement or undertaking to which such Company is a
party or by which such  Company's  assets are  bound,  and (iii) is within  such
Company's corporate powers.

                  (c) This Agreement is the legal, valid and binding obligations
of each Company and,  enforceable  against each Company in  accordance  with its
terms, subject to applicable bankruptcy, insolvency, reorganization,  moratorium

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and  similar  laws  affecting  creditors'  rights and  remedies  generally,  and
subject,  as to  enforceability,  to general  principles  of  equity,  including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).

                  (D) SECTION  3(D)(I) OF THE DISCLOSURE  LETTER sets forth each
Company's name as it appears in its  certificate  or articles of  incorporation,
the type of entity of each Company,  the  organizational  identification  number
issued by each Company's  jurisdiction of  incorporation  or a statement that no
such number has been issued, each Company's  jurisdiction of formation,  and the
location of Company's chief executive  office,  corporate  offices,  warehouses,
other  locations of  Collateral  and  locations  where the Books and Records are
kept. During the five years immediately preceding the date of this Agreement, no
Company has, except as set forth in SECTION  3(D)(II) OF THE DISCLOSURE  LETTER,
been known as or conducted  business  under any other name,  including any trade
names.

                  (e) The operation of each Company's  business is in compliance
in all material  respects  with all  applicable  Federal,  State and local laws,
rules and ordinances,  including to all laws,  rules and ordinances  relating to
taxes,  payment  and  withholding  of  payroll  taxes,   employer  and  employee
contributions  and similar items,  securities,  employee  retirement and welfare
benefits, employee health safety and environmental matters.

                  (f) Based upon the Employee  Retirement Income Security Act of
1974 ("ERISA"),  and the regulations and published  interpretations  thereunder:
(i) no Company has engaged in any prohibited  transactions as defined in Section
406 of ERISA and Section 4975 of the Internal  Revenue  Code,  as amended;  (ii)
each Company has met all applicable  minimum funding  requirements under Section
302 of ERISA in respect of its plans;  (iii) no Company has any Knowledge of any
event or occurrence which would cause the Pension Benefit  Guaranty  Corporation
to  institute  proceedings  under Title IV of ERISA to  terminate  any  employee
benefit  plan(s);   (iv)  no  Company  has  any  fiduciary   responsibility  for
investments  with respect to any plan  existing for the benefit of Persons other
than such Companies' employees; and (v) no Company has withdrawn,  completely or
partially,  from any multi-employer  pension plan so as to incur liability under
the Multi-employer Pension Plan Amendments Act of 1980.

                  (g) Each  Company  is, as of the date of this  Agreement,  (i)
solvent,  (ii) able to pay its debts as they  mature in the  ordinary  course of
such Company's business,  (iii) has capital sufficient to carry on its business,
and (iv) the fair market value of such Company's  assets  (calculated on a going
concern basis) is in excess of the amount of its liabilities.

                  (h) There is not pending or, to the Knowledge of the Companies
threatened,  any litigation,  action or proceeding which if decided adversely to
the Companies would reasonably be likely to result in a Material Adverse Effect.

                  (i) None of the proceeds of the Note will be used  directly or
indirectly  to  "purchase" or "carry"  "margin  stock" or to repay  indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective  meanings
of each of the quoted terms under  Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect.

                  (j) (i) the  Companies  have one or more common  shareholders,
directors  and officers,  (ii) the  businesses  and corporate  activities of the
other Companies are closely related to, and substantially  benefit, the business
and  corporate  activities  of such  Company,  (iii)  the  financial  and  other
operations  of  the  Companies  are  performed  on a  combined  basis  as if the
Companies constituted a consolidated corporate group, and (iv) such Company will
receive a substantial  economic  benefit from  entering into this  Agreement and
will receive a substantial economic benefit from the application of the proceeds
of the Note in each case,  whether or not such  amount is used  directly by such
Company.

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         4. COVENANTS OF THE COMPANIES. Each Company hereby covenants and agrees
with Lender as follows:

                  (a) No Company  will  change (i) its name as it appears on its
certificate or articles of incorporation,  (ii) its type of legal entity,  (iii)
its organization  identification  number,  if any, issued by its jurisdiction of
incorporation, or (iv) its jurisdiction of incorporation.

                  (b) Each Company will  promptly  inform  Lender in writing of:
(i) the commencement of any proceedings and  investigations  by or before and/or
the receipt of any  written  notices  from any  Governmental  Authority  and all
actions and proceedings in any court or before any arbitrator  against or in any
way concerning any event which would, singly or in the aggregate,  be reasonably
likely  to  result in a  Material  Adverse  Effect;  (ii) any  amendment  of any
Company's  certificate or articles of incorporation or bylaws;  (iii) any change
in the Companies  business which has had or would reasonably be likely to result
in a Material  Adverse  Effect;  (iv) any Event of Default;  (v) any event which
with the passage of time or giving of notice or both would  constitute a default
under any agreement for the payment of borrowed  money to which any Company is a
party or by which any Company or any of such Company's  assets may be bound; and
(vii) any change in any Company's name or any other name used in its business.

                  (c) No Company  will,  without the written  consent of Lender,
which consent shall not  unreasonably  withheld or delayed:  (i) create,  incur,
assume or suffer to exist any  indebtedness  for borrowed  money  (exclusive  of
trade debt) whether secured or unsecured other than such Company's  indebtedness
to Lender;  (ii)  cancel any debt owing to it except in the  ordinary  course of
such Company's business;  (iii) assume,  guarantee,  endorse or otherwise become
directly or contingently  liable in connection with any obligations of any other
Person  other  than an  Affiliate  of a Company;  (iv)  directly  or  indirectly
declare,  pay or make any dividend or  distribution on any class of its stock or
apply any of its funds, property or assets to the purchase,  redemption or other
retirement  of any stock of a  Company,  other  than in the  ordinary  course of
business; (v) purchase or hold beneficially any other securities or evidences of
indebtedness  of, make or permit to exist any loans or advances  to, or make any
investment or acquire any interest whatsoever in, any other Person other than in
the ordinary  course of business,  including any  partnership  or joint venture,
except  travel  advances or loans to such  Company's  officers and employees not
exceeding  at any one  time an  aggregate  of  $10,000  for  all  Companies  and
investments in the existing or future subsidiaries of the Companies;  (vi) enter
into any merger,  consolidation or other  reorganization  with or into any other
Person or  acquire  all or a  portion  of the  assets of stock of any  Person or
permit any other Person to  consolidate  with or merge with it other than in any
internal reorganization of the Companies;  (vii) materially change the nature of
the business in which it is presently engaged;  or (viii) change its fiscal year
or make any changes in accounting treatment and reporting  practices,  except as
required by GAAP,  or with  respect to the tax  reporting  treatment,  except as
required by law.

                  (d) No Company shall  encumber,  mortgage,  pledge,  assign or
grant any lien,  security  interest or other interest in or to any Collateral to
any Person other than (i) Lender, or (ii) Permitted Liens.

                  (e) No Company shall dispose of any of the Collateral  whether
by sale,  lease or  otherwise  except for the sale of  Inventory in the ordinary
course of business and for the disposition or transfer in the ordinary course of
such Companies'  business during any fiscal year of obsolete worn-out  Equipment
having an aggregate fair market value in any such calendar year of not more than
$100,000  and only to the extent that (i) the  proceeds of any such  disposition
are used to acquire replacement  Equipment which is subject to Lender's security
interest or (ii) the  proceeds of which are  remitted to Lender in  reduction of
the Obligations.

                  (f) Each Company shall defend the security  interest of Lender
in  and to  the  Collateral  against  the  claims  and  demands  of all  Persons
whomsoever, and take such reasonable actions, including notification of Lender's
interest in Collateral, as Lender may reasonably request.

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                  (g) Each Company  shall place  notations  upon such  Company's
Books and Records to disclose Lender's security interest in the Collateral.

                  (h)  Each  Company  shall  perform  such  other  steps  as are
reasonably  requested by Lender to create and maintain in Lender's favor a valid
perfected  security  interest in the  Collateral,  subject only to the Permitted
Liens.

                  (i) Each Company shall promptly  notify Lender of any material
loss, damage or destruction of any of the Fixed Collateral.

                  (j) Each Company shall keep and maintain the Equipment in good
operating  condition,  except  for  ordinary  wear and tear,  and shall make all
reasonably necessary repairs and replacements thereof.

                  (k) Each Company shall maintain and keep the Collateral at the
addresses listed in SECTION 3(D)(I) OF THE DISCLOSURE LETTER, PROVIDED, that any
Company may change such  locations or open a new  location,  if (i) such Company
provides  Lender 30 calendar  days prior  written  notice of such changes or new
location  and (ii) prior to such change or opening of a new location it executes
and  delivers  to Lender  such  agreements  as Lender  may  reasonably  request,
including landlord agreements,  mortgagee  agreements and warehouse  agreements,
each in form and substance reasonably satisfactory to Lender.

                  (l) Each  Company  will pay or  discharge  when due all taxes,
assessments and governmental  charges or levies imposed upon such Company or any
of the  Collateral  unless such Company  shall have applied for and received any
available extensions therefor, or such amounts are being diligently contested in
good faith by  appropriate  proceedings  and  adequate  reserves  therefore  are
maintained on the books of such Company in conformity with GAAP.

                  (m) Each Company will bear the full risk of loss from any loss
of any nature  whatsoever with respect to the Collateral.  At each Company's own
cost and expense,  each Company shall (i) keep all its insurable  properties and
properties  in which it has an  interest  insured  against  the hazards of fire,
flood,  sprinkler leakage,  those hazards covered by extended coverage insurance
and such other  hazards,  and for such  amounts,  as is customary in the case of
companies  engaged in businesses  similar to such Company's  including  business
interruption insurance;  (ii) maintain a bond in such amounts as is customary in
the case of companies engaged in businesses  similar to such Company's  insuring
against larceny,  embezzlement or other criminal  misappropriation  of insured's
officers and  employees who may either singly or jointly with others at any time
have access to the assets or funds of such  Company  (iii)  maintain  public and
product  liability  insurance  against  claims  for  personal  injury,  death or
property damage suffered by others; (iv) maintain all such worker's compensation
or similar  insurance as may be required under the laws of any  jurisdiction  in
which such  Company is engaged in  business;  and (v)  furnish  Lender  with (x)
copies of all policies and evidence of the maintenance of such policies at least
30 calendar days before any expiration  date, (y)  endorsements to such policies
naming Lender as an "additional insured", and (z) evidence that as to Lender the
insurance coverage shall not be impaired or invalidated by any act or neglect of
any Company and the insurer will provide  Lender with at least 30 calendar  days
notice prior to cancellation.

         5.  FURTHER  ASSURANCES.  At any time and from  time to time,  upon the
written  request of Lender and at the sole  expense of  Companies,  each Company
shall promptly  execute and deliver any and all such  instruments  and documents
and take such further actions as Lender may reasonably request (a) to obtain the
full benefits of this Agreement (b) to protect,  preserve and maintain  Lender's
interests in the  Collateral  or (c) to enable  Lender to exercise all or any of
the rights and powers herein granted.

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     6. POWER OF ATTORNEY. The Companies hereby irrevocably make, constitute and
appoint the Lender as each Company's true and lawful attorney-in-fact (with full
power of  substitution  and  re-substitution,  in the name of each Company,  the
Lender or otherwise) with the power to,  following the occurrence and during the
continuation of an Event of Default, do any and every act that the Companies are
obligated by this  Agreement  to do, to do all things  necessary to preserve and
protect  the  Collateral,  and to  preserve,  protect,  and keep  perfected  the
Lender's  security  interest in the  Collateral.  This power of attorney,  being
coupled with an interest,  is  irrevocable so long as the  Obligations  have not
been fully satisfied.

     7. TERMINATION OF LIEN. The liens,  security interest and rights granted to
Lender  hereunder  shall  continue  in full  force and  effect  until all of the
Obligations  shall have been satisfied in full.  Promptly upon  satisfaction  in
full of the  Obligations,  Lender shall deliver to the Companies such documents,
agreements or instruments  as shall be reasonably  requested by the Companies to
evidence  the   satisfaction  of  the  Obligations  and  the  release  or  other
termination of Lender's interest in the Collateral.

     8. EVENTS OF DEFAULT.  The  occurrence of any of the following  shall be an
Event of Default under this Agreement:

                  (a)  the  failure  of  Workstream  or any  Company  to pay any
amounts due to the Lender  under the Note,  after  expiration  of any notice and
cure or grace periods;

                  (b) a written notice of default is received by any Company for
the failure to pay any amounts due under any other  agreement or instrument  for
borrowed  money,  and  such  failure  continues  after  the  expiration  of  any
applicable notice and cure or grace periods;

                  (c) any  Company's  failure  to pay any taxes  when due unless
such taxes are being contested in good faith by appropriate proceedings and with
respect to which  adequate  reserves  have been  established  on the  applicable
Company's books;

                  (d) any Company's  material  breach of any  representation  or
warranty  set forth in this  Agreement,  which  breach is not cured within seven
Business Days  following  Lender's  delivery of written notice of such breach to
Company  Agent,  or if such breach can not be cured within seven  Business Days,
the applicable  Company or Companies have not undertaken  steps to commence cure
of such breach;

                  (e) any Company's  failure to materially  perform any covenant
set forth in this  Agreement,  which breach is not cured  within seven  Business
Days  following  Lender's  delivery of written  notice of such breach to Company
Agent,  or if such  breach can not be cured  within  seven  Business  Days,  the
applicable  Company or Companies have not  undertaken  steps to commence cure of
such breach;

                  (f) any Company  shall make an  assignment  for the benefit of
its creditors, or file a voluntary petition under the bankruptcy code, any other
federal or state insolvency law, or apply for or consent to the appointment of a
receiver, trustee or custodian of all or part of its property.

                  (g)  any   Company   shall  file  an  answer   admitting   the
jurisdiction of a court and the material  allegations of an involuntary petition
filed  against  it  under  the  bankruptcy  code,  any  other  federal  or state
insolvency law, or shall fail to have such petition dismissed within 60 calendar
days after its filing.

                  (h) an order for relief  shall be entered  against any Company
following the filing of an involuntary  petition under the bankruptcy  code, any
other  federal  or  state  insolvency  law,  or if an  order  shall  be  entered
appointing  a receiver,  trustee or custodian of all or parts of either of their
respective property; or

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                  (i) an attachment or levy is made upon the Collateral having a
value in excess of $100,000 or a judgment is rendered against any Company or any
Company's  property   involving  a  liability  of  more  than  $100,000,   which
attachment, levy or judgement shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 calendar days from the entry thereof.

     9. REMEDIES.  Upon the occurrence of an Event of Default, Lender shall have
the  right  to  demand  repayment  in full of all  Obligations,  whether  or not
otherwise due. Until all Obligations  shall have been paid in full, Lender shall
retain its lien and  security  interest in and on the  Collateral.  Lender shall
have, in addition to all other rights provided  herein,  the rights and remedies
of a secured  party under the UCC,  and under other  applicable  law,  all other
legal and equitable rights to which Lender may be entitled,  including the right
to take immediate possession of the Collateral, to require a Company to assemble
the Collateral,  at Companies' expense,  and to make it available to Lender at a
place designated by Lender which is reasonably convenient to both parties and to
enter (without any breach of peace) any of the premises of a Company or wherever
the Collateral shall be located, and to keep and store the same on said premises
until sold (and if said premises be the property of such  Company,  such Company
agrees not to charge Lender for storage thereof), and the right to apply for the
appointment of a receiver for such Company's property.  Further,  Lender may, at
any time or times after the occurrence and during the  continuation  of an Event
of Default,  sell and deliver all Collateral  held by or for Lender at public or
private sale for cash,  upon credit or otherwise  in a  commercially  reasonable
manner and during the  continuation.  The requirement of reasonable notice shall
be met if such notice is given to Company  Agent at Company  Agent's  address at
least 10  Business  Days  before the time of the event of which  notice is being
given. Lender may be the purchaser at any sale, if it is public. The proceeds of
sale  shall be  applied  first to all  costs  and  expenses  of sale,  including
reasonable  attorneys'  fees,  and  second to the  payment  of all  Obligations.
Promptly after the payment in full, Obligations, and after the payment by Lender
of any  other  amount  required  by any  provision  of  law,  including  Section
9-608(a)(1) of the UCC (but only after Lender has received what Lender considers
reasonable proof of a subordinate  party's security  interest),  the surplus, if
any, shall be paid to Company Agent or its  representatives  or to whosoever may
be  lawfully  entitled  to  receive  the  same,  or  as  a  court  of  competent
jurisdiction  may  direct.  Companies  shall  remain  liable to  Lender  for any
deficiency.

     10. NO WAIVER; CUMULATIVE REMEDIES. Failure by Lender to exercise any right
or remedy under this Agreement,  or delay by Lender in exercising the same, will
not operate as a waiver;  no waiver by Lender will be effective  unless it is in
writing and then only to the extent  specifically  stated.  Lender's  rights and
remedies under this Agreement shall be cumulative and not exclusive of any other
right or remedy which Lender may have.

     11.  REVIVAL.  Each Company  further  agrees that to the extent any Company
makes a payment or  payments  to Lender,  which  payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy act, state or federal law,  common law or equitable  cause,
then, to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made.

     12. NOTICES.  Any notice or request hereunder may be given to Company Agent
or Lender at the  respective  addresses  set forth below or as may  hereafter be
specified in a notice designated as a change of address under this Paragraph 12.
Any notice or request  hereunder shall be given by registered or certified mail,
return receipt requested,  hand delivery,  overnight mail or telecopy (confirmed
by mail).  Notices and requests shall be deemed to have been given and received,
in the case of those by hand  delivery,  when  delivered  to any  officer of the
party to whom it is addressed,  in the case of those by mail or overnight  mail,
deemed to have been  given and  received  on the fifth  calendar  day  following
deposit in the mail, or the next Business Day following deposit with a reputable
overnight  mail  carrier,  and, in the case of a  telecopy,  when sent if during
normal  business  hours for recipient or if after normal  business hours for the

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recipient,  the next Business Day.  Notice to counsel for either party shall not
be deemed to be notice to such party.

Notices shall be provided as follows:

         If to Lender:                 Michael Mullarkey
                                       1050 W. Deerpath Road
                                       Lake Forest, IL 60045
                                       Telecopier: (613) 270-0774

         If to Company Agent:          Workstream Inc.
                                       495 March Road, Suite 300
                                       Ottawa, Ontario, Canada K2K-3G1
                                       Attention:  Chief Financial Officer
                                       Telecopier:  (613) 270-0774

         With a copy to:               Cozen O'Connor
                                       1900 Market Street
                                       Philadelphia, PA  19103
                                       Attention:  Larry Laubach, Esquire
                                       Telecopier:  (215) 665-2013

         13. GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.

                  (a) THIS  AGREEMENT  SHALL BE  GOVERNED BY AND  CONSTRUED  AND
ENFORCED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK  APPLICABLE  TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE.

                  (b) EACH  COMPANY AND LENDER  HEREBY  CONSENTS AND AGREES THAT
THE  STATE OR  FEDERAL  COURTS  LOCATED  IN THE  STATE OF NEW  YORK  SHALL  HAVE
EXCLUSIVE  JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY
COMPANY AND LENDER  PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF
OR  RELATED TO THIS  AGREEMENT.  NOTHING  IN THIS  AGREEMENT  SHALL BE DEEMED OR
OPERATE TO PRECLUDE  LENDER FROM  BRINGING  SUIT OR TAKING OTHER LEGAL ACTION IN
ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS,  TO REALIZE ON THE COLLATERAL
OR ANY OTHER  SECURITY  FOR THE  OBLIGATIONS,  OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF LENDER.  EACH COMPANY AND LENDER  EXPRESSLY  SUBMITS AND
CONSENTS IN ADVANCE TO SUCH  JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH COMPANY AND LENDER HEREBY WAIVES ANY OBJECTION WHICH IT MAY
HAVE  BASED  UPON LACK OF  PERSONAL  JURISDICTION,  IMPROPER  VENUE OR FORUM NON
CONVENIENS.

                  (c) THE PARTIES  DESIRE  THAT THEIR  DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,  TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL  SYSTEM AND OF  ARBITRATION,  THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,  SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE,  WHETHER  ARISING IN CONTRACT,  TORT, OR OTHERWISE  BETWEEN
LENDER AND EACH COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.

                                       8
<PAGE>

     14.  ATTORNEYS' FEES. In the event that any suit or action is instituted to
enforce any provision in this  Agreement,  the prevailing  party in such dispute
shall be entitled to recover from the losing party all  reasonable  fees,  costs
and  expenses  of  enforcing  any right of such  prevailing  party under or with
respect to this Agreement,  including,  without limitation, such reasonable fees
and  expenses  of  attorneys  and  accountants,  which  shall  include,  without
limitation, all reasonable fees, costs and expenses of appeals.

     15. ENTIRE  UNDERSTANDING.  This Agreement and the Note contains the entire
understanding  between  Companies and Lender and any promises,  representations,
warranties or  guarantees  not herein  contained  shall have no force and effect
unless in writing,  signed by each Companies' and Lender's respective  officers.
Neither this  Agreement  nor any portion or  provisions  thereof may be changed,
modified,  amended, waived,  supplemented,  discharged,  cancelled or terminated
orally or by any course of dealing,  or in any manner other than by an agreement
in writing, signed by the party to be charged.

     16. SEVERABILITY.  Wherever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this  Agreement  shall be prohibited by or invalid under
applicable  law  such  provision  shall be  ineffective  to the  extent  of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions thereof.

     17. CAPTIONS.  All captions are and shall be without substantive meaning or
content of any kind whatsoever.

     18. COUNTERPARTS;  TELECOPIER SIGNATURES. This Agreement may be executed in
one or more counterparts,  each of which shall constitute an original and all of
which taken together shall constitute one and the same agreement.  Any signature
delivered  by a party  via  telecopier  transmission  shall be  deemed to be any
original signature hereto.

     19.  CONSTRUCTION.  The parties acknowledge that each party and its counsel
have reviewed this  Agreement  and that any rule of  construction  to the effect
that any ambiguities are to be resolved  against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments, schedules or
exhibits thereto.

     20.  CONFIDENTIALITY.  Lender  shall hold and protect from  disclosure  all
confidential  non-public  information  regarding Companies (whether financial or
otherwise)  obtained  pursuant to the requirements of this Agreement in the same
manner as Lender  protects  its own  confidential  non-public  information  from
disclosure,  but in any event with no less than reasonable  care;  PROVIDED that
Lender may make  disclosures of such  information to those officers,  directors,
employees,  agents  and  representatives  of Lender who have a need to know such
information for purposes of administering  Lender's rights and obligations under
this  Agreement,  so long as such  officers,  directors,  employees,  agents and
representatives  are subject to an  obligation  of  confidentiality  at least as
restrictive as the one set forth in this Section 38.

     21. AGENCY PROVISIONS; WAIVER OF SUBROGATION.

                  (a) Each Company hereby  irrevocably  designates Company Agent
to be its attorney and agent hereunder, and in such capacity to execute, deliver
and receive all instruments, documents, writings, notices and further assurances
now or hereafter required hereunder, on behalf of such Company or Companies.

                  (b)  Each  Company  expressly  waives  any and all  rights  of
subrogation,  reimbursement,  indemnity, exoneration,  contribution or any other
claim which such Company may now or hereafter  have against any other Company or
other person or entity directly or contingently liable for the amounts due under
the Note, or against or with respect to any other Company's property (including,

                                       9
<PAGE>

without  limitation,  any property which is Collateral for the amounts due under
the Note),  arising from the existence or performance of this  Agreement,  until
all  Obligations  have  been  paid in full in cash and this  Agreement  has been
irrevocably terminated

     22.  ASSIGNABILITY.  This Agreement shall be binding upon the Companies and
each of their respective  successors and assigns, and shall inure to the benefit
of the Lender and his heirs, representatives,  successors and permitted assigns.
The Lender may assign his rights under this Agreement to a third party; PROVIDED
that the Lender  notifies the Company Agent in writing of the assignment of this
Agreement and the identity of such  assignee,  and the Company Agent consents in
writing prior to such  assignment.  Any  assignment  or attempted  assignment in
violation of this Paragraph 22 shall be void ab initio.

                      [SIGNATURES APPEAR ON THE NEXT PAGE]

                                       10
<PAGE>

         IN WITNESS WHEREOF,  this Security  Agreement has been duly executed as
of the day and year first above written.

WORKSTREAM INC., as Company Agent                  XYLO, INC.

By: /S/ PAUL HAGGARD                           By: /S/ MICHAEL MULLARKEY
    --------------------------------------       ------------------------------
      Name:  Paul Haggard                      By:  Michael Mullarkey
      Title:  Chief Financial Officer          Title:  President

WORKSTREAM USA, INC.

By: /S/ PAUL HAGGARD                           /S/ MICHAEL MULLARKEY
    --------------------------------------     --------------------------------
      Name:  Paul Haggard                         MICHAEL MULLARKEY
      Title:  Chief Financial Officer

6FIGUREJOBS.COM, INC.

By: /S/ MICHAEL MULLARKEY
  ---------------------------------------
      Name:  Michael Mullarkey
      Title:  President

ICARIAN, INC.

By: /S/ MICHAEL MULLARKEY
  ---------------------------------------
      Name:  Michael Mullarkey
      Title:  President

REZLOGIC, INC.

By: /S/ MICHAEL MULLARKEY
  ---------------------------------------
      Name:  Michael Mullarkey
      Title:  President

THE OMNI PARTNERS, INC.

By: /S/ MICHAEL MULLARKEY
  ---------------------------------------
      Name:  Michael Mullarkey
      Title:  President

                                       11
<PAGE>

                                    EXHIBITS

Exhibit A - Subsidiaries
Exhibit B - Definitions

<PAGE>

                                    EXHIBIT A
                                    COMPANIES

Workstream USA, Inc., a Delaware corporation.
6FigureJobs.com, Inc., a Delaware corporation.
Icarian, Inc., a Delaware corporation.
RezLogic, Inc., a Colorado corporation.
The Omni Partners, Inc., a Florida corporation.
Xylo, Inc., a Delaware corporation.

                                      A-1
<PAGE>

                                    EXHIBIT B
                                   DEFINITIONS

                  "ACCOUNTS"  means all  "accounts",  as such term is defined in
the UCC, now owned or  hereafter  acquired by any  Company,  including:  (a) all
accounts  receivable,   other  receivables,   book  debts  and  other  forms  of
obligations  (other  than forms of  obligations  evidenced  by chattel  paper of
instruments)  (including any such  obligations  that may be  characterized as an
account or contract right under the UCC);  (b) all of such  Company's  rights to
any goods represented by any of the foregoing  (including unpaid sellers' rights
of  rescission,  replevin,  reclamation  and  stoppage  in transit and rights to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Company  for  goods  or other  property  sold,  leased,  licensed,  assigned  or
otherwise  disposed of, for a policy of insurance issued or to be issued,  for a
secondary  obligation  incurred or to be incurred,  for energy provided or to be
provided,  for the use or hire of a vessel  under a charter  or other  contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by such Company or in  connection  with any other  transaction
(whether or not yet earned by performance on the part of such Company);  (e) all
general intangibles  relating to the foregoing;  and (f) all collateral security
of any kind given by any Account  Debtor or any other Person with respect to any
of the foregoing.

                  "AFFILIATE" of any Person means (a) any Person which, directly
or  indirectly,  is in control of, is controlled  by, or is under common control
with such Person,  or (b) any Person who is a director  (i) of such  Person,  or
(ii)  of any  Person  described  in  clause  (a)  above.  For  purposes  of this
definition, control of a Person shall mean the power, direct or indirect, (i) to
vote fifty percent (50%) or more of the securities  having ordinary voting power
for the election of  directors  of such  Person,  or (ii) to direct or cause the
direction of the  management  and policies of such Person whether by contract or
otherwise.

                  "BOOKS  AND  RECORDS"  means all  books,  records,  contracts,
licenses,  insurance  policies,  environmental  audits,  files,  computer files,
computer discs and other data and software storage and media devices, accounting
books and records,  financial  statements (actual and pro forma) and any and all
records  and  instruments  maintained  by  the  Companies  and  relating  to the
Collateral.

                  "BUSINESS DAY" means a day that is not a Saturday, a Sunday or
other day on which  commercial  banks are  required or permitted to be closed in
the State of New York.

                  "DISCLOSURE  LETTER"  means the letter dated  January 31, 2003
from Company Agent to Lender disclosing those matters  specifically  required to
be set forth therein by this Agreement.

                  "EQUIPMENT"  means all  "equipment" as such term is defined in
the UCC, now owned or hereafter  acquired,  wherever located,  including any and
all  machinery,  apparatus,  equipment,  fittings,  furniture,  fixtures,  motor
vehicles and other tangible  personal  property  (other than Inventory) of every
kind and description  that may be used in such Company's  operations or that are
owned by such Company,  and all parts,  accessories  and accessions  thereto and
substitutions and replacements therefor.

                  "GAAP"  means  generally   accepted   accounting   principles,
practices  and  procedures  in effect from time to time in the United  States of
America.

                  "GOVERNMENTAL  AUTHORITY" means any nation or government,  any
state or other  political  subdivision  thereof,  and any agency,  department or
other  entity  exercising  executive,   legislative,   judicial,  regulatory  or
administrative functions of or pertaining to government.

                  "KNOWLEDGE"-"KNOWN"  and  all  variations  thereof  means  the
actual knowledge of the President or Chief Executive  Officer or Chief Financial
Officer of Company Agent, without any duty of investigation or inquiry.

                                      B-1
<PAGE>

                  "INVENTORY" means all "inventory",  as such term is defined in
the UCC,  now owned or  hereafter  acquired,  wherever  located,  including  all
inventory, merchandise, goods and other personal property that are held by or on
behalf  of such  Companies  for  sale or  lease  or are  furnished  or are to be
furnished under a contract of service or that constitute raw materials,  work in
process,  finished goods,  returned goods, or materials or supplies of any kind,
nature  or  description  used or  consumed  or to be used  or  consumed  in such
Companies'  business or in the  processing,  production,  packaging,  promotion,
delivery or shipping of the same, including all supplies and embedded software.

                  "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on
(a) the  condition,  operations,  assets,  business or  prospects of any Company
taken as a whole, (b) any Company's ability to pay or perform the Obligations in
accordance with the terms hereof, (c) the value of the Collateral,  the Lender's
lien on the Collateral or the priority of the Lender's lien or (d) the practical
realization  of  the  benefits  of  Lender's  rights  and  remedies  under  this
Agreement.

                  "PERMITTED  LIENS" means (a) liens of carriers,  warehousemen,
artisans,  bailees, mechanics and materialmen incurred in the ordinary course of
business securing sums not overdue; (b) liens incurred in the ordinary course of
business in connection with workmen's  compensation,  unemployment  insurance or
other forms of  governmental  insurance  or  benefits,  relating  to  employees,
securing sums (i) not overdue or (ii) being  diligently  contested in good faith
provided that adequate reserves with respect thereto are maintained on the books
of the applicable Company in conformity with GAAP; (c) liens in favor of Lender;
(d) liens for taxes (i) not yet due or (ii) being  diligently  contested in good
faith by appropriate  proceedings,  provided that adequate reserves with respect
thereto are maintained on the books of the applicable Company in conformity with
GAAP; (e) liens securing Purchase Money Indebtedness, and (f) liens specified in
SECTION A OF THE DISCLOSURE LETTER.

                  "PERSON"   means   any   individual,    sole   proprietorship,
partnership, limited liability partnership, joint venture, trust, unincorporated
organization,  association, corporation, limited liability company, institution,
public  benefit  corporation,  entity or  government  (whether  federal,  state,
county, city, municipal or otherwise,  including any instrumentality,  division,
agency, body or department thereof),  and shall include such Person's successors
and assigns.

                  "PROCEEDS"  means  "proceeds",  as such term is defined in the
UCC and, in any event, shall include: (a) any and all proceeds of any insurance,
indemnity,  warranty or guaranty  payable to any Company  from time to time with
respect to any Collateral; and (b) any and all payments (in any form whatsoever)
made or due and payable to any Company from time to time in connection  with any
requisition, confiscation, condemnation, seizure or forfeiture of any Collateral
by any Governmental Authority.

                  "PURCHASE  MONEY  INDEBTEDNESS"  means  (a)  any  indebtedness
incurred for the payment of all or any part of the  purchase  price of any fixed
asset,  (b) any  indebtedness  incurred  for the sole  purpose of  financing  or
refinancing  all or any part of the purchase  price of any fixed asset,  and (c)
any renewals,  extensions or refinancings  thereof (but not any increases in the
principal amounts thereof outstanding at that time).

                  "UCC" means the Uniform  Commercial Code as the same may, from
time be in effect in the State of New York; PROVIDED, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment,  perfection
or priority of, or remedies with respect to,  Lender' Lien on any  Collateral is
governed by the Uniform  Commercial  Code as in effect in a  jurisdiction  other
than the State of New York,  the term "UCC"  shall mean the  Uniform  Commercial
Code as in effect in such other  jurisdiction  for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions;  PROVIDED FURTHER,  that
to the  extent  that UCC is used to define any term  herein or in any  Ancillary
Agreement  and  such  term is  defined  differently  in  different  Articles  or

                                      B-2
<PAGE>

Divisions  of the UCC,  the  definition  of such term  contained  in  Article or
Division 9 shall govern.

                                      B-3

<PAGE><PAGE>
                                                                  EXHIBIT 10.3
                           GENERAL SECURITY AGREEMENT

THIS AGREEMENT is made as of January 31, 2003.

BETWEEN:            WORKSTREAM INC.,
                    a corporation incorporated under the laws of Canada

                    (hereinafter referred to as the "Debtor")

AND:                MICHAEL F. MULLARKEY,
                    an individual residing in the City of Lake Forest, Illinois

                    (hereinafter referred to as the "Secured Party").

WHEREAS the Secured Party has, on one or more prior occasions, made a loan to
the Debtor and its subsidiaries, Workstream USA, Inc., 6FigureJobs.com, Inc.,
Icarian, Inc., Rezlogic, Inc., The OmniPartners, Inc. and Xylo, Inc. (the
"Subsidiaries") (the Debtor shall act as agent for the Subsidiaries, the
"Company Agent") in the aggregate amount of One Million Two Hundred and
Eighty-Seven Thousand Nine Hundred and One Dollars and Four Cents
($1,287,901.04), and in consideration for such loan, the Debtor wishes to grant
to the Secured Party a security interest in the Collateral (as defined below);

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the covenants and agreements herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1.       INTERPRETATION

         1.1.     In this Agreement, unless something in the subject matter or
                  context is inconsistent therewith:

                  1.1.1.   "AGREEMENT" means this agreement and all amendments
                           made hereto by written agreement between the Secured
                           Party and the Debtor.

<PAGE>

                  1.1.2. "COLLATERAL" has the meaning set out in Section 2.01.

                  1.1.3.   "EVENT OF DEFAULT" has the meaning set out in Section
                           6.01.

                  1.1.4.   "LOAN" means the loan in the aggregate amount of One
                           Million Two Hundred and Eighty-Four Thousand Nine
                           Hundred and Thirty-Two Dollars and Twenty-Nine Cents
                           ($1,284,932.29) made by the Secured Party to the
                           Debtor as evidenced by a Term Note dated January 31,
                           2003 made by the Debtor and the Subsidiaries in
                           favour of the Secured Party (the "Loan Agreement").

                  1.1.5.   "OBLIGATIONS" means all obligations and liabilities
                           of any kind whatsoever of the Debtor to the Secured
                           Party in connection with or relating to the Loan.

                  1.1.6.   "PPSA" means the Personal Property Security Act
                           (Ontario), as now enacted or as the same may from
                           time to time be amended, re-enacted or replaced.

                  1.1.7.   The terms "accessions", "accounts", "chattel paper",
                           "documents of title", "goods", "instruments",
                           "intangibles", "inventory", "money", "proceeds" and
                           "securities" whenever used herein have the meanings
                           given to those terms in the PPSA.

         1.2.     SECTIONS AND HEADINGS The division of this Agreement into
                  Articles and Sections and the insertion of headings are for
                  convenience of reference only and will not affect the
                  construction or interpretation of this Agreement. The terms
                  "this Agreement", "hereof", "hereunder" and similar
                  expressions refer to this Agreement and not to any particular
                  Article, Section or other portion hereof and include any
                  agreement supplemental hereto. Unless something in the subject

                                       2
<PAGE>

                  matter or context is inconsistent therewith, reference herein
                  to Articles and Sections are to Articles and Sections of this
                  Agreement.

         1.3.     EXTENDED MEANINGS In this Agreement words importing the
                  singular number only include the plural and vice versa, words
                  importing any gender include all genders and words importing
                  persons include individuals, partnerships, associations,
                  trusts, unincorporated organizations and corporations.

2.       GRANT OF SECURITY INTEREST

         2.1.     SECURITY INTEREST As general and continuing security for the
                  payment and performance of the Obligations, the Debtor hereby
                  grants to the Secured Party a security interest in the present
                  and future undertaking and property, both real and personal,
                  of the Debtor which are more particularly described in
                  Sections 2.11, 2.12, 2.13, 2.14 and 2.15 below (collectively,
                  the "Collateral"). As further general and continuing security
                  for the payment and performance of the Obligations, the Debtor
                  hereby assigns the Collateral to the Secured Party and
                  mortgages and charges the Collateral as and by way of a fixed
                  and specific mortgage and charge to the Secured Party.

                  2.1.1.   RECEIVABLES: all debts, accounts, claims and choses
                           in action for monetary amounts which are now or which
                           may hereafter become due, owing or accruing due to
                           the Debtor (collectively, the "Receivables");

                  2.1.2.   INVENTORY: all inventory of whatever kind and
                           wherever situated including, without limiting the
                           generality of the foregoing, all goods held for sale
                           or lease or furnished or to be furnished under
                           contracts for service or used or consumed in the
                           business of the Debtor (collectively, the
                           "Inventory");

                                       3
<PAGE>

                  2.1.3.   EQUIPMENT: all machinery, equipment, fixtures,
                           furniture, plant, vehicles and other tangible
                           personal property which are not Inventory
                           (collectively, the "Equipment");

                  2.1.4.   SUBSTITUTIONS, ETC.: all replacements of,
                           substitutions for and increases, additions and
                           accessions to any of the property described in this
                           Section2.1; and

                  2.1.5.   PROCEEDS: all proceeds of any Collateral in any form
                           derived directly or indirectly from any dealing with
                           the Collateral or that indemnifies or compensates for
                           the loss of or damage to the Collateral;

                  provided that the said assignment and mortgage and charge will
                  not (i) extend or apply to the last day of the term of any
                  lease or any agreement therefor now held or hereafter acquired
                  by the Debtor, but should the Secured Party enforce the said
                  assignment or mortgage and charge, the Debtor will thereafter
                  stand possessed of such last day and must hold it in trust to
                  assign the same to any person acquiring such term in the
                  course of the enforcement of the said assignment and mortgage
                  and charge, or (ii) render the Secured Party liable to observe
                  or perform any term, covenant or condition of any agreement,
                  document or instrument to which the Debtor is a party or by
                  which it is bound.

         2.2.     ATTACHMENT OF SECURITY INTEREST The Debtor acknowledges that
                  value has been given and agrees that the security interest
                  granted hereby will attach when the Debtor signs this
                  Agreement and the Debtor has any rights in the Collateral.

         2.3.     EXCEPTION FOR CONTRACTUAL RIGHTS The security interest granted
                  hereby does not and will not extend to, and Collateral will
                  not include any agreement, right, franchise, licence or permit
                  (the "contractual rights") to which the Debtor is a party or
                  of which the Debtor has the benefit, to the extent that the
                  creation of the security interest herein would constitute a

                                       4
<PAGE>

                  breach of the terms of or permit any person to terminate the
                  contractual rights, but the Debtor must hold its interest
                  therein in trust for the Secured Party and will assign such
                  contractual rights to the Secured Party forthwith upon
                  obtaining the consent of the other party thereto. The Debtor
                  agrees that it will, upon the request of the Secured Party,
                  use all commercially reasonable efforts to obtain any consent
                  required to permit any contractual rights to be subjected to
                  the security interest.

3.       GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEBTOR

         3.1.     REPRESENTATIONS AND WARRANTIES The Debtor hereby represents
                  and warrants to the Secured Party that:

                  3.1.1.   the Debtor is a corporation duly incorporated,
                           organized and subsisting under the laws of its
                           jurisdiction of incorporation, with the corporate
                           power to enter into this Agreement; this Agreement
                           has been duly authorized by all necessary corporate
                           action on the part of the Debtor and constitutes a
                           legal and valid agreement binding upon the Debtor
                           enforceable in accordance with its terms; the making
                           and performance of this Agreement will not result in
                           the breach of, constitute a default under, contravene
                           any provision of, or result in the creation of, any
                           lien, charge, security interest, encumbrance or any
                           other rights of others upon any property of the
                           Debtor pursuant to any agreement, indenture or other
                           instrument to which the Debtor is a party or by which
                           the Debtor or any of its property may be bound or
                           affected; and

                  3.1.2.   the address of the Debtor's principal place of
                           business and the office where it keeps the Collateral
                           or its records respecting the Collateral, is located
                           at 495 March Road, Suite 300, Ottawa, Ontario K2K
                           3G1.

                                       5
<PAGE>

         3.2.     COVENANTS The Debtor covenants with the Secured Party that the
                  Debtor will:

                  3.2.1.   ensure that the representations and warranties set
                           forth in Section 3.01 will be true and correct at all
                           times;

                  3.2.2.   maintain, use and operate the Collateral and carry on
                           and conduct its business in a lawful and
                           business-like manner;

                  3.2.3.   not permit the Collateral to be affixed to real or
                           personal property so as to become a fixture or
                           accession without the prior written consent of the
                           Secured Party;

                  3.2.4.   defend the Collateral against all claims and demands
                           respecting the Collateral made by all persons at any
                           time and, except as otherwise provided herein, will
                           keep the Collateral free and clear of all security
                           interests, mortgages, charges, liens and other
                           encumbrances or interests except for those previously
                           disclosed to the Secured Party, existing as of the
                           date of this Agreement or hereafter approved in
                           writing by the Secured Party prior to their creation
                           or assumption;

                  3.2.5.   not change its principal place of business and the
                           location of the office where it keeps the Collateral
                           or its records respecting the Receivables, or move
                           any of the Inventory, Securities or Equipment from
                           the principal place of business, without the prior
                           written consent of the Secured Party;

                  3.2.6.   pay all rents, taxes, levies, assessments and
                           government fees or dues lawfully levied, assessed or
                           imposed in respect of the Collateral or any part
                           thereof as and when the same become due and payable,
                           and will exhibit to the Secured Party, when required,
                           the receipts and vouchers establishing such payment;

                                       6
<PAGE>

                  3.2.7.   keep proper books of account in accordance with sound
                           accounting practice, will furnish to the Secured
                           Party such financial information and statements and
                           such information and statements relating to the
                           Collateral as the Secured Party may from time to time
                           require, and the Debtor will permit the Secured Party
                           or its authorized agents at any time at the expense
                           of the Debtor to examine the books of account and
                           other financial records and reports relating to the
                           Collateral and to make copies thereof and take
                           extracts therefrom;

                  3.2.8.   from time to time forthwith at the request of the
                           Secured Party furnish to the Secured Party in writing
                           all information requested relating to the Collateral,
                           and the Secured Party will be entitled from time to
                           time at any reasonable time to inspect the Collateral
                           and make copies of all information relating to the
                           Collateral and for such purposes the Secured Party
                           will have access to all premises occupied by the
                           Debtor or where the Collateral may be found;

                  3.2.9.   from time to time forthwith at the request of the
                           Secured Party execute and deliver all such financing
                           statements, schedules, assignments and documents, and
                           do all such further acts and things as may be
                           reasonably required by the Secured Party to
                           effectively carry out the full intent and meaning of
                           this Agreement or to better evidence and perfect the
                           security interest, assignment and mortgage and charge
                           granted hereby, and the Debtor hereby irrevocably
                           constitutes and appoints the Secured Party, or any
                           Receiver appointed by the court or the Secured Party,
                           the true and lawful attorney of the Debtor, with full
                           power of substitution, to do any of the foregoing in
                           the name of the Debtor whenever and wherever the
                           Secured Party or any such Receiver may consider it to
                           be necessary or expedient;

                                       7
<PAGE>

                  3.2.10.  not change its name or, if the Debtor is a
                           corporation, will not amalgamate with any other
                           corporation without first giving notice to the
                           Secured Party of its new name and the names of all
                           amalgamating corporations and the date when such new
                           name or amalgamation is to become effective; and

                  3.2.11.  pay to the Secured Party forthwith upon demand all
                           reasonable costs and expenses (including, without
                           limiting the generality of the foregoing, all legal,
                           Receiver's and accounting fees and expenses) incurred
                           by or on behalf of the Secured Party in connection
                           with the preparation, execution and perfection of
                           this Agreement and the carrying out of any of the
                           provisions of this Agreement including, without
                           limiting the generality of the foregoing, protecting
                           and preserving the security interest, assignment and
                           mortgage and charge granted hereby and enforcing by
                           legal process or otherwise the remedies provided
                           herein; and all such costs and expenses will be added
                           to and form part of the Obligations secured
                           hereunder.

4.       INSURANCE

         4.1.     INSURANCE The Debtor must obtain and maintain, at its own
                  expense, insurance against loss or damage to the Collateral
                  including, without limiting the generality of the foregoing,
                  loss by fire (including so-called extended coverage), theft,
                  collision and such other risks of loss as are customarily
                  insured against on this type of Collateral, in an amount not
                  less than the full replacement value thereof, in such form and
                  with such insurers as are reasonably satisfactory to the
                  Secured Party. If any such policies of insurance contain a
                  co-insurance clause, the Debtor will either cause any such
                  co-insurance clause to be waived or maintain at all times a
                  sufficient amount of insurance to meet the requirements of any
                  such co-insurance clause so as to prevent the Debtor from
                  becoming a co-insurer under the terms of any such policy. All

                                       8
<PAGE>

                  such policies must name the Secured Party as an additional
                  insured and loss payee thereof, as the Secured Party's
                  interests may appear, and must provide that the insurer will
                  give the Secured Party at least 10 days written notice of
                  intended cancellation. At the Secured Party's request, the
                  Debtor must furnish the Secured Party with a copy of any
                  policy of insurance and certificate of insurance or other
                  evidence satisfactory to the Secured Party that such insurance
                  coverage is in effect. The Debtor must give the Secured Party
                  notice of any damage to, or loss of, the Collateral forthwith
                  upon the occurrence of any such damage or loss. Should the
                  Debtor fail to make any payment or perform any other
                  obligation provided in this Section, the Secured Party will
                  have the right, but not the obligation, without notice or
                  demand upon the Debtor and without releasing the Debtor from
                  any obligation hereunder or waiving any rights to enforce this
                  Agreement, to perform any or all of such obligations. The
                  amount of all such payments made and all costs, fees and
                  expenses incurred by the Secured Party in performing such
                  obligations will be immediately due and payable by the Debtor.

5.       DEALING WITH COLLATERAL

         5.1.     DEALING WITH COLLATERAL BY THE DEBTOR The Debtor must not
                  sell, lease or otherwise dispose of any of the Collateral
                  without the prior written consent of the Secured Party, except
                  that the Debtor may, until an Event of Default occurs, deal
                  with its money or sell items of Inventory in the ordinary
                  course of its business so that the purchaser thereof takes
                  title thereto free and clear of the security interest,
                  assignment and mortgage and charge granted hereby, but all
                  proceeds of any such sale will continue to be subject to the
                  security interest, assignment and mortgage and charge granted
                  hereby and all money received by the Debtor will be received
                  as trustee for the Secured Party and must be held separate and
                  apart from other money of the Debtor and must be paid over to
                  the Secured Party upon request.

                                       9
<PAGE>

         5.2.     RIGHTS AND DUTIES OF THE SECURED PARTY

                  5.2.1.   The Secured Party may perform any of its rights and
                           duties hereunder by or through agents and is entitled
                           to retain counsel and to act in reliance upon the
                           advice of such counsel concerning all matters
                           pertaining to its rights and duties hereunder.

                  5.2.2.   In the holding of the Collateral, the Secured Party
                           and any nominee on its behalf is only bound to
                           exercise the same degree of care as it would exercise
                           with respect to similar property of its own of
                           similar value held in the same place. The Secured
                           Party and any nominee on its behalf will be deemed to
                           have exercised reasonable care with respect to the
                           custody and preservation of the Collateral if it
                           takes such action for that purpose as the Debtor
                           reasonably requests in writing, but failure of the
                           Secured Party or its nominee to comply with any such
                           request will not of itself be deemed a failure to
                           exercise reasonable care.

         5.3.     NOTIFICATION OF ACCOUNT DEBTORS Before an Event of Default
                  occurs, the Secured Party may give notice of this Agreement
                  and the security interest and assignment granted hereby to any
                  account debtors of the Debtor or to any other person liable to
                  the Debtor and, after the occurrence of an Event of Default,
                  may give notice to any such account debtors or other person to
                  make all further payments to the Secured Party, and any
                  payment or other proceeds of Collateral received by the Debtor
                  from account debtors or from any other person liable to the
                  Debtor whether before or after any notice is given by the
                  Secured Party must be held by the Debtor in trust for the
                  Secured Party and paid over to the Secured Party on request.

         5.4.     APPLICATION OF FUNDS Except where the Debtor, when not in
                  default hereunder, so directs in writing at the time of
                  payment, all money collected or received by the Secured Party

                                       10
<PAGE>

                  in respect of the Collateral may be applied on account of such
                  parts of the Obligations as the Secured Party in its sole
                  discretion determines, or may be held unappropriated in a
                  collateral account, or in the discretion of the Secured Party
                  may be released to the Debtor, all without prejudice to the
                  Secured Party's rights against the Debtor.

6.       EVENTS OF DEFAULT AND REMEDIES

         6.1.     EVENTS OF DEFAULT The occurrence of any of the following shall
                  be an Event of Default under this Agreement:

                  6.1.1.   the Debtor or any Subsidiary's failure to pay any
                           amounts due to the Secured Party under the Loan
                           Agreement, after expiration of any notice and cure or
                           grace periods;

                  6.1.2.   a written notice of default is received by the Debtor
                           or any Subsidiary for the failure to pay any amounts
                           due under any other agreement or instrument for
                           borrowed money, and such failure continues after the
                           expiration of any applicable notice and cure or grace
                           periods;

                  6.1.3.   the Debtor or any Subsidiary's failure to pay any
                           taxes when due unless such taxes are being contested
                           in good faith by appropriate proceedings and with
                           respect to which adequate reserves have been
                           established on the applicable Debtor or Subsidiary's
                           books;

                  6.1.4.   the Debtor or any Subsidiary's material breach of any
                           representation or warranty set forth in this
                           Agreement, which breach is not cured within seven
                           business days following Secured Party's delivery of
                           written notice of such breach to Company Agent, or if
                           such breach can not be cured within seven business

                                       11
<PAGE>

                           days, the applicable Debtor or any Subsidiary have
                           not undertaken steps to commence cure of such breach;

                  6.1.5.   the Debtor or any Subsidiary's failure to perform any
                           covenant set forth in this Agreement, which breach is
                           not cured within seven business days following
                           Secured Party's delivery of written notice of such
                           breach to Company Agent, or if such breach can not be
                           cured within seven business days, the applicable
                           Debtor or any Subsidiary have not undertaken steps to
                           commence cure of such breach;

                  6.1.6.   the Debtor or any Subsidiary shall make an assignment
                           for the benefit of its creditors, or file a voluntary
                           petition under the bankruptcy code, any other federal
                           or state insolvency law, or apply for or consent to
                           the appointment of a receiver, trustee or custodian
                           of all or part of its property.

                  6.1.7.   the Debtor or any Subsidiary shall file an answer
                           admitting the jurisdiction of a court and the
                           material allegations of an involuntary petition filed
                           against it under the bankruptcy act, any other
                           federal or provincial insolvency law, or shall fail
                           to have such petition dismissed within 60 calendar
                           days after its filing.

                  6.1.8.   an order for relief shall be entered against the
                           Debtor or any Subsidiary following the filing of an
                           involuntary petition under the bankruptcy act, any
                           other federal or provincial insolvency law, or if an
                           order shall be entered appointing a receiver, trustee
                           or custodian of all or parts of either of their
                           respective property; or

                  6.1.9.   an attachment or levy is made upon the Collateral
                           having a value in excess of $100,000 or a judgment is
                           rendered against the Debtor or any Subsidiary's
                           property involving a liability of more than $100,000,
                           which attachment, levy or judgement shall not have

                                       12
<PAGE>

                           been vacated, discharged, stayed or bonded pending
                           appeal within 30 calendar days from the entry
                           thereof.

         6.2.     REMEDIES Upon the occurrence of an Event of Default, the
                  Secured Party shall have the right to demand repayment in full
                  of all Obligations, whether or not otherwise due. Until all
                  Obligations shall have been paid in full, the Secured Party
                  shall retain its lien and security interest in and on the
                  Collateral. The Secured Party shall have, in addition to all
                  other rights provided herein, the rights and remedies of a
                  secured party under the PPSA, and under other applicable law,
                  all other legal and equitable rights to which Secured Party
                  may be entitled, including the right to take immediate
                  possession of the Collateral, to require the Debtor or any
                  Subsidiary to assemble the Collateral, at their expense, and
                  to make it available to the Secured Party at a place
                  designated by the Secured Party which is reasonably convenient
                  to both parties and to enter (without any breach of peace) any
                  of the premises of the Debtor or any Subsidiary or wherever
                  the Collateral shall be located, and to keep and store the
                  same on said premises until sold (and if said premises be the
                  property of such the Debtor or any Subsidiary, the Debtor or
                  any Subsidiary agrees not to charge the Secured Party for
                  storage thereof), and the right to apply for the appointment
                  of a receiver for the Debtor or any Subsidiary's property.
                  Further, the Secured Party may, at any time or times after the
                  occurrence and during the continuation of an Event of Default,
                  sell and deliver all Collateral held by or for the Secured
                  Party at public or private sale for cash, upon credit or
                  otherwise in a commercially reasonable manner and during the
                  continuation. The requirement of reasonable notice shall be
                  met if such notice is given to Company Agent at Company
                  Agent's address at least 10 business days before the time of
                  the event of which notice is being given. The Secured Party
                  may be the purchaser at any sale, if it is public. The
                  proceeds of sale shall be applied first to all costs and
                  expenses of sale, including reasonable attorneys' fees, and
                  second to the payment of all Obligations. Promptly after the
                  payment in full, Obligations, and after the payment by the

                                       13
<PAGE>

                  Secured Party of any other amount required by any provision of
                  law, but only after the Secured Party has received what the
                  Secured Party considers reasonable proof of a subordinate
                  party's security interest), the surplus, if any, shall be paid
                  to Company Agent or its representatives or to whosoever may be
                  lawfully entitled to receive the same, or as a court of
                  competent jurisdiction may direct. The Debtor or any
                  Subsidiary shall remain liable to the Secured Party for any
                  deficiency.

7.       GENERAL

         7.1.     BENEFIT OF THE AGREEMENT This Agreement will enure to the
                  benefit of and be binding upon the heirs, personal
                  representatives, successors and permitted assigns, as the case
                  may be, of the parties hereto.

         7.2.     ENTIRE AGREEMENT This Agreement has been entered into pursuant
                  to the provisions of the Loan Agreement and is subject to all
                  the terms and conditions thereof and, if there is any conflict
                  or inconsistency between the provisions of this Agreement and
                  the provisions of the Loan Agreement, the rights and
                  obligations of the parties will be governed by the provisions
                  of the Loan Agreement. There are no representations,
                  warranties, terms, conditions, undertakings or collateral
                  agreements, express, implied or statutory, between the Secured
                  Party and the Debtor with respect to the subject matter hereof
                  except as expressly set forth herein or in the Loan Agreement.

         7.3.     AMENDMENTS AND WAIVERS No amendment to this Agreement will be
                  valid or binding unless set forth in writing and duly executed
                  by all of the parties hereto. No waiver of any breach of any
                  provision of this Agreement will be effective or binding
                  unless made in writing and signed by the party purporting to
                  give the same and, unless otherwise provided in the written
                  waiver, will be limited to the specific breach waived.

                                       14
<PAGE>

         7.4.     ASSIGNMENT The rights of the Secured Party under this
                  Agreement may be assigned by the Secured Party without the
                  prior consent of the Debtor. The Debtor may not assign its
                  obligations under this Agreement.

         7.5.     SEVERABILITY If any provision of this Agreement is determined
                  to be invalid or unenforceable in whole or in part, such
                  invalidity or unenforceability will attach only to such
                  provision or part thereof and the remaining part of such
                  provision and all other provisions hereof will continue in
                  full force and effect.

         7.6.     NOTICES Notices shall be provided as follows:

                  To the Debtor:         Workstream Inc.
                                         495 March Road, Suite 300
                                         Ottawa, ON  K2K 3G1
                                         Attn:  Paul Haggard

                  With a copy to:        Michael A. Gerrior
                                         Perley-Robertson, Hill & McDougall LLP
                                         90 Sparks Street, Suite 400
                                         Ottawa, ON K1P 1E2

                  To the Secured Party:  1050 West Deerpath Road
                                         Lake Forest, Illinois  60045

                  Any notice or request hereunder may be given to Company Agent
                  or the Secured Party at the respective addresses set forth
                  above or as may hereafter be specified in a notice designated
                  as a change of address under this Paragraph 7. Any notice or
                  request hereunder shall be given by registered or certified
                  mail, return receipt requested, hand delivery, overnight mail
                  or telecopy (confirmed by mail). Notices and requests shall be
                  deemed to have been given and received, in the case of those
                  by hand delivery, when delivered to any officer of the party
                  to whom it is addressed, in the case of those by mail or
                  overnight mail, deemed to have been given and received on the
                  fifth calendar day following deposit in the mail, or the next

                                       15
<PAGE>

                  business day following deposit with a reputable overnight mail
                  carrier, and, in the case of a telecopy, when sent if during
                  normal business hours for recipient or if after normal
                  business hours for the recipient, the next business day.
                  Notice to counsel for either party shall not be deemed to be
                  notice to such party.

         7.7.     ADDITIONAL CONTINUING SECURITY This Agreement and the security
                  interest, assignment and mortgage and charge granted hereby
                  are in addition to and not in substitution for any other
                  security now or hereafter held by the Secured Party and this
                  Agreement is a continuing agreement and security that will
                  remain in full force and effect until discharged by the
                  Secured Party.

         7.8.     FURTHER ASSURANCES The Debtor must at its expense from time to
                  time do, execute and deliver, or cause to be done, executed
                  and delivered, all such financing statements, further
                  assignments, documents, acts, matters and things as may be
                  reasonably requested by the Secured Party for the purpose of
                  giving effect to this Agreement or for the purpose of
                  establishing compliance with the representations, warranties
                  and covenants herein contained.

         7.9.     POWER OF ATTORNEY Upon the occurrence of an Event of Default
                  that is continuing, the Debtor hereby irrevocably constitutes
                  and appoints any officer for the time being of the Secured
                  Party the true and lawful attorney of the Debtor, with full
                  power of substitution, to do, make and execute all such
                  statements, assignments, documents, acts, matters or things
                  with the right to use the name of the Debtor whenever and
                  wherever the officer may deem necessary or expedient and from
                  time to time to exercise all rights and powers and to perform
                  all acts of ownership in respect to the Collateral in
                  accordance with this Agreement.

         7.10.    DISCHARGE The Debtor will not be discharged from any of the
                  Obligations or from this Agreement except by a release or
                  discharge signed in writing by the Secured Party. Promptly
                  upon satisfaction in full of the Obligations, the Secured

                                       16
<PAGE>

                  Party shall deliver to the Debtor such documents, agreements
                  or instruments as shall be reasonably requested by the Debtor
                  to evidence satisfaction of the Obligations and the release or
                  other termination of the Secured Party's interest in the
                  Collateral.

         7.11.    GOVERNING LAW This Agreement will be governed by and construed
                  in accordance with the laws of the Province of Ontario and the
                  laws of Canada applicable therein.

         7.12.    EXECUTED COPY The Debtor acknowledges receipt of a fully
                  executed copy of this Agreement.

         7.13.    COUNTERPARTS; FACSIMILE SIGNATURES This Agreement may be
                  executed in one or more counterparts, each of which shall
                  constitute an original and all of which taken together shall
                  constitute one and the same agreement. Any signature delivered
                  by a party via facsimile transmission shall be deemed to be
                  any original signature hereto.

         7.14.    CONFIDENTIALITY The Secured Party shall hold and protect from
                  disclosure all confidential non-public information regarding
                  the Debtor and any Subsidiary (whether financial or otherwise)
                  obtained pursuant to the requirements of this Agreement in the
                  same manner as the Secured Party protects its own confidential
                  non-public information from disclosure, but in any event with
                  no less than reasonable care; PROVIDED that the Secured Party
                  may make disclosures of such information to those officers,
                  directors, employees, agents and representatives of the
                  Secured Party who have a need to know such information for
                  purposes of administering the Secured Party's rights and
                  obligations under this Agreement, so long as such officers,
                  directors, employees, agents and representatives are subject

                                       17
<PAGE>

                  to an obligation of confidentiality at least as restrictive as
                  the one set forth in this Section 7.14.

         IN WITNESS WHEREOF this Agreement has been executed by the Debtor.

                                              WORKSTREAM INC.

                                              By: /S/ PAUL HAGGARD
                                                 ------------------------------
                                              Name:  Paul Haggard
                                              Title:  Chief Financial Officer

Witness: /S/ BARBARA JOFFEE                   /S/ MICHAEL MULLARKEY
        ------------------------------        ---------------------------------
                                              MICHAEL F. MULLARKEY

                                       18
<PAGE>

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