Document:

Unassociated Document

    Exhibit
      10.04

    

    GUARANTY

    (Corporate)

     

    
      
        	New
                York, New York	
                June
                  30, 2007

              

      

    

     

    FOR
      VALUE
      RECEIVED, and in consideration of loans made or to be made or credit otherwise
      extended or to be extended by GERBER
      FINANCE INC.
      (“Lender”) to or for the account of NUTRITION
      21, INC. and NUTRITION 21, LLC (collectively
      “Borrower”) from time to time and at any time and for other good and valuable
      consideration and to induce Lender, in its discretion, to make such loans or
      extensions of credit and to make or grant such renewals, extensions, releases
      of
      collateral or relinquishments of legal rights as Lender may deem advisable,
      the
      undersigned (and each of them if more than one, the liability under this
      Guaranty being joint and several) (jointly and severally referred to as
“Guarantor” or “the undersigned”) unconditionally guaranties to Lender, its
      successors, endorsees and assigns the prompt payment when due (whether by
      acceleration or otherwise) of all present and future obligations and liabilities
      of any and all kinds of Borrower to Lender and of all instruments of any nature
      evidencing or relating to any such obligations and liabilities upon which
      Borrower or one or more parties and Borrower is or may become liable to Lender,
      whether incurred by Borrower as maker, endorser, drawer, acceptor, guarantor,
      accommodation party or otherwise, and whether due or to become due, secured
      or
      unsecured, absolute or contingent, joint or several, and however or whenever
      acquired by Lender, whether arising under, out of, or in connection with that
      certain Loan and Security Agreement dated as of June 30, 2007 between Lender
      and
      Borrower (as amended, modified, restated or supplemented from time to time,
      the
“Loan Agreement”) or any documents, instruments or agreements relating to or
      executed in connection with the Loan Agreement or any documents, instruments
      or
      agreements referred to therein (together with the Loan Agreement, as each may
      be
      amended, modified, restated or supplemented from time to time, the “Loan
      Documents”), or otherwise (all of which are herein collectively referred to as
      the “Obligations”), and irrespective of the genuineness, validity, regularity or
      enforceability of such Obligations, or of any instrument evidencing any of
      the
      Obligations or of any collateral therefore or of the existence or extent of
      such
      collateral, and irrespective of the allowability, allowance or disallowance
      of
      any or all of the Obligations in any case commenced by or against Borrower
      under
      Title 11, United States Code, including, without limitation, obligations or
      indebtedness of Borrower for post-petition interest, fees, costs and charges
      that would have accrued or been added to the Obligations but for the
      commencement of such case. In furtherance of the foregoing, the undersigned
      hereby agrees as follows:

    

    1. No
      Impairment.
      Lender
      may at any time and from time to time, either before or after the maturity
      thereof, without notice to or further consent of the undersigned, extend the
      time of payment of, exchange or surrender any collateral for, renew or extend
      any of the Obligations or increase or decrease the interest rate thereon, and
      may also make any agreement with Borrower or with any other party to or person
      liable on any of the Obligations, or interested therein, for the extension,
      renewal, payment, compromise, discharge or release thereof, in whole or in
      part,
      or for any modification of the terms thereof or of any agreement between Lender
      and Borrower or any such other party or person, or make any election of rights
      Lender may deem desirable under the United States Bankruptcy Code, as amended,
      or any other federal or state bankruptcy, reorganization, moratorium or
      insolvency law relating to or affecting the enforcement of creditors’ rights
      generally (any of the foregoing, an “Insolvency Law”) without in any way
      impairing or affecting this Guaranty. This instrument shall be effective
      regardless of the subsequent incorporation, merger or consolidation of Borrower,
      or any change in the composition, nature, personnel or location of Borrower
      and
      shall extend to any successor entity to Borrower, including a debtor in
      possession or the like under any Insolvency Law.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    2. Guaranty
      Absolute.
      The
      undersigned guarantees that the Obligations will be paid strictly in accordance
      with the terms of the Loan Agreement and/or any other document, instrument
      or
      agreement creating or evidencing the Obligations, regardless of any law,
      regulation or order now or hereafter in effect in any jurisdiction affecting
      any
      of such terms or the rights of Borrower with respect thereto. Guarantor hereby
      knowingly accepts the full range of risk encompassed within a contract of
“continuing guaranty” which risk includes the possibility that Borrower will
      contract additional indebtedness for which Guarantor may be liable hereunder
      after Borrower’s financial condition or ability to pay its lawful debts when
      they fall due has deteriorated, whether or not Borrower has properly authorized
      incurring such additional indebtedness. The undersigned acknowledges that (i)
      no
      oral representations, including any representations to extend credit or provide
      other financial accommodations to Borrower, have been made by Lender to induce
      the undersigned to enter into this Guaranty and (ii) any extension of credit
      to
      the Borrower shall be governed solely by the provisions of the Loan Agreement.
      The liability of the undersigned under this Guaranty shall be absolute and
      unconditional, in accordance with its terms, and shall remain in full force
      and
      effect without regard to, and shall not be released, suspended, discharged,
      terminated or otherwise affected by, any circumstance or occurrence whatsoever,
      including, without limitation: (a) any waiver, indulgence, renewal, extension,
      amendment or modification of or addition, consent or supplement to or deletion
      from or any other action or inaction under or in respect of the Loan Documents
      or any other instruments or agreements relating to the Obligations or any
      assignment or transfer of any thereof, (b) any lack of validity or
      enforceability of any Loan Document or other documents, instruments or
      agreements relating to the Obligations or any assignment or transfer of any
      thereof, (c) any furnishing of any additional security to Lender or its
      assignees or any acceptance thereof or any release of any security by Lender
      or
      its assignees, (d) any limitation on any party’s liability or obligation under
      the Loan Documents or any other documents, instruments or agreements relating
      to
      the Obligations or any assignment or transfer of any thereof or any invalidity
      or unenforceability, in whole or in part, of any such document, instrument
      or
      agreement or any term thereof, (e) any bankruptcy, insolvency, reorganization,
      composition, adjustment, dissolution, liquidation or other like proceeding
      relating to Borrower, or any action taken with respect to this Guaranty by
      any
      trustee or receiver, or by any court, in any such proceeding, whether or not
      the
      undersigned shall have notice or knowledge of any of the foregoing, (f) any
      exchange, release or nonperfection of any collateral, or any release, or
      amendment or waiver of or consent to departure from any guaranty or security,
      for all or any of the Obligations or (g) any other circumstance which might
      otherwise constitute a defense available to, or a discharge of, the undersigned.
      Any amounts due from the undersigned to Lender shall bear interest until such
      amounts are paid in full at the highest rate then applicable to the Obligations.
      Obligations include post-petition interest whether or not allowed or
      allowable.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    3. Waivers.
      (a) This
      Guaranty is a guaranty of payment and not of collection. Lender shall be under
      no obligation to institute suit, exercise rights or remedies or take any other
      action against Borrower or any other person liable with respect to any of the
      Obligations or resort to any collateral security held by it to secure any of
      the
      Obligations as a condition precedent to the undersigned being obligated to
      perform as agreed herein and Guarantor hereby waives any and all rights which
      it
      may have by statute or otherwise which would require Lender to do any of the
      foregoing. Guarantor further consents and agrees that Lender shall be under
      no
      obligation to marshal any assets in favor of Guarantor, or against or in payment
      of any or all of the Obligations. The undersigned hereby waives all suretyship
      defenses and any rights to interpose any defense, counterclaim or offset of
      any
      nature and description which the undersigned may have or which may exist between
      and among Lender, Borrower and/or the undersigned with respect to the
      undersigned’s obligations under this Guaranty, or which Borrower may assert on
      the underlying debt, including but not limited to failure of consideration,
      breach of warranty, fraud, payment (other than cash payment in full of the
      Obligations), statute of frauds, bankruptcy, infancy, statute of limitations,
      accord and satisfaction, and usury. 

    

    (b) The
      undersigned further waives (i) notice of the acceptance of this Guaranty, of
      the
      making of any such loans or extensions of credit, and of all notices and demands
      of any kind to which the undersigned may be entitled, including, without
      limitation, notice of adverse change in Borrower’s financial condition or of any
      other fact which might materially increase the risk of the undersigned and
      (ii)
      presentment to or demand of payment from anyone whomsoever liable upon any
      of
      the Obligations, protest, notices of presentment, non-payment or protest and
      notice of any sale of collateral security or any default of any
      sort.

    

    (c) Notwithstanding
      any payment or payments made by the undersigned hereunder, or any setoff or
      application of funds of the undersigned by Lender, the undersigned shall not
      be
      entitled to be subrogated to any of the rights of Lender against Borrower or
      against any collateral or guarantee or right of offset held by Lender for the
      payment of the Obligations, nor shall the undersigned seek or be entitled to
      seek any contribution or reimbursement from Borrower in respect of payments
      made
      by the undersigned hereunder, until all amounts owing to Lender by Borrower
      on
      account of the Obligations are paid in full and the Loan Agreement has been
      terminated. If, notwithstanding the foregoing, any amount shall be paid to
      the
      undersigned on account of such subrogation rights at any time when all of the
      Obligations shall not have been paid in full and the Loan Agreement shall not
      have been terminated, such amount shall be held by the undersigned in trust
      for
      Lender, segregated from other funds of the undersigned, and shall forthwith
      upon, and in any event within two (2) business days of, receipt by the
      undersigned, be turned over to Lender in the exact form received by the
      undersigned (duly endorsed by the undersigned to Lender, if required), to be
      applied against the Obligations, whether matured or unmatured, in such order
      as
      Lender may determine, subject to the provisions of the Loan Agreement. Any
      and
      all present and future debts and obligations of Borrower to any of the
      undersigned are hereby waived and postponed in favor of, and subordinated to
      the
      full payment and performance of, all present and future debts and obligations
      of
      Borrower to Lender.

    

    
      
        
        

      

      
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    4. Security.
      All
      sums at any time to the credit of the undersigned and any property of the
      undersigned in Lender’s possession or in the possession of any bank, financial
      institution or other entity that directly or indirectly, through one or more
      intermediaries, controls or is controlled by, or is under common control with,
      Lender (each such entity, an “Affiliate”) shall be deemed held by Lender or such
      Affiliate, as the case may be, as security for any and all of the undersigned’s
      obligations to Lender and to any Affiliate of Lender, no matter how or when
      arising and whether under this or any other instrument, agreement or
      otherwise.

    

    5. Representations
      and Warranties.
      The
      undersigned hereby represents and warrants (all of which representations and
      warranties shall survive until all Obligations are indefeasibly satisfied in
      full and the Loan Agreement has been irrevocably terminated), that:

    

    (a) Corporate
      Status.
      The
      undersigned is a corporation duly organized, validly existing and in good
      standing and has full power, authority and legal right to own its property
      and
      assets and to transact the business in which it is engaged.

    

    (b) Authority
      and Execution.
      The
      undersigned has full power, authority and legal right to execute and deliver,
      and to perform its obligations under, this Guaranty and has taken all necessary
      corporate and legal action to authorize the execution, delivery and performance
      of this Guaranty.

    

    (c) Legal,
      Valid and Binding Character.
      This
      Guaranty constitutes the legal, valid and binding obligation of the undersigned
      enforceable in accordance with its terms, except as enforceability may be
      limited by applicable Insolvency Law.

    

    (d) Violations.
      The
      execution, delivery and performance of this Guaranty will not violate any
      requirement of law applicable to the undersigned or any material contract,
      agreement or instrument to which the undersigned is a party or by which the
      undersigned or any property of the undersigned is bound or result in the
      creation or imposition of any mortgage, lien or other encumbrance other than
      to
      Lender on any of the property or assets of the undersigned pursuant to the
      provisions of any of the foregoing.

    

    (e) Consents
      or Approvals.
      No
      consent of any other person or entity (including, without limitation, any
      creditor of the undersigned) and no consent, license, permit, approval or
      authorization of, exemption by, notice or report to, or registration, filing
      or
      declaration with, any governmental authority is required in connection with
      the
      execution, delivery, performance, validity or enforceability of this
      Guaranty.

    

    (f) Litigation.
      No
      litigation, arbitration, investigation or administrative proceeding of or before
      any court, arbitrator or governmental authority, bureau or agency is currently
      pending or, to the best knowledge of the undersigned, threatened (i) with
      respect to this Guaranty or any of the transactions contemplated by this
      Guaranty or (ii) against or affecting the undersigned, or any of property or
      assets of the undersigned, which, if adversely determined, would have a material
      adverse effect on the business, operations, assets or condition, financial
      or
      otherwise, of the undersigned.

    

    (g) Material
      Adverse Change.
      Since
      March 31, 2007, which is the date of the undersigned’s most recent financial
      statement delivered to Lender, there has been no material adverse change in
      the
      assets or condition, financial or otherwise, of the undersigned.

    

    
      
        
        

      

      
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    (h) Financial
      Benefit.
      The
      undersigned has derived or expects to derive a financial or other advantage
      from
      each and every loan, advance or extension of credit made under the Loan
      Agreement or other Obligation incurred by Borrower to Lender.

    

    The
      foregoing representations and warranties (other than that set forth in paragraph
      (g) above) shall be deemed to have been made by the undersigned on the date
      of
      each borrowing by Borrower under the Loan Agreement on and as of such date
      of
      such borrowing as though made hereunder on and as of such date.

    

    6. Acceleration.
      (a) If
      any
      breach of any covenant or condition or other event of default shall occur and
      be
      continuing under any agreement made by Borrower or the undersigned to Lender,
      or
      either Borrower or the undersigned should at any time become insolvent, or
      make
      a general assignment, or if a proceeding in or under any Insolvency Law shall
      be
      filed or commenced by, or in respect of, the undersigned, or if a notice of
      any
      lien, levy, or assessment is filed of record with respect to any assets of
      the
      undersigned by the United States of America or any department, agency, or
      instrumentality thereof, or if any taxes or debts owing at any time or times
      hereafter to any one of them becomes a lien or encumbrance upon any assets
      of
      the undersigned in Lender’s possession, or otherwise, any and all Obligations
      shall for purposes hereof, at Lender’s option, be deemed due and payable without
      notice notwithstanding that any such Obligation is not then due and payable
      by
      Borrower.

    

    (b) The
      undersigned will promptly notify Lender of any default by the undersigned in
      the
      performance or observance of any term or condition of any agreement to which
      the
      undersigned is a party if the effect of such default is to cause, or permit
      the
      holder of any obligation under such agreement to cause, such obligation to
      become due prior to its stated maturity and, if such an event occurs, Lender
      shall have the right to accelerate the undersigned’s obligations
      hereunder.

    

    7. Payments
      from Guarantor.
      Lender,
      in its sole and absolute discretion, with or without notice to the undersigned,
      may apply on account of the Obligations any payment from the undersigned or
      any
      other guarantor, or amounts realized from any security for the Obligations,
      or
      may deposit any and all such amounts realized in a non-interest bearing cash
      collateral deposit account to be maintained as security for the
      Obligations.

    

    8. Costs.
      The
      undersigned shall pay on demand, all costs, fees and expenses (including
      expenses for legal services of every kind) relating or incidental to the
      enforcement or protection of the rights of Lender hereunder or under any of
      the
      Obligations.

    

    9. No
      Termination.
      This is
      a continuing irrevocable guaranty and shall remain in full force and effect
      and
      be binding upon the undersigned, and the undersigned’s successors and assigns,
      until all of the Obligations have been paid in full and the Loan Agreement
      has
      been irrevocably terminated. If any of the present or future Obligations are
      guarantied by persons, partnerships or corporations in addition to the
      undersigned, the death, release or discharge in whole or in part or the
      bankruptcy, merger, consolidation, incorporation, liquidation or dissolution
      of
      one or more of them shall not discharge or affect the liabilities of the
      undersigned under this Guaranty.

    

    
      
        
        

      

      
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    10. Recapture.
      Anything in this Guaranty to the contrary notwithstanding, if Lender receives
      any payment or payments on account of the liabilities guaranteed hereby, 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 Insolvency Law, common law
      or
      equitable doctrine, then to the extent of any sum not finally retained by
      Lender, the undersigned’s obligations to Lender shall be reinstated and this
      Guaranty shall remain in full force and effect (or be reinstated) until payment
      shall have been made to Lender, which payment shall be due on
      demand.

    

    11. Books
      and Records.
      The
      books and records of Lender showing the account between Lender and Borrower
      shall be admissible in evidence in any action or proceeding, shall be binding
      upon the undersigned for the purpose of establishing the items therein set
      forth
      and shall constitute prima facie proof thereof.

    

    12. No
      Waiver.
      No
      failure on the part of Lender to exercise, and no delay in exercising, any
      right, remedy or power hereunder shall operate as a waiver thereof, nor shall
      any single or partial exercise by Lender of any right, remedy or power hereunder
      preclude any other or future exercise of any other legal right, remedy or power.
      Each and every right, remedy and power hereby granted to Lender or allowed
      it by
      law or other agreement shall be cumulative and not exclusive of any other,
      and
      may be exercised by Lender at any time and from time to time.

    

    13. Waiver
      of Jury Trial.
      THE
      UNDERSIGNED DOES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
      RIGHT
      TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR WITH RESPECT TO THIS
      GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR RELATING OR
      INCIDENTAL HERETO. THE UNDERSIGNED DOES HEREBY CERTIFY THAT NO REPRESENTATIVE
      OR
      AGENT OF LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD
      NOT,
      IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL
      PROVISION. 

    

    14. Governing
      Law; Jurisdiction; Amendments.
      THIS
      INSTRUMENT CANNOT BE CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED,
      CONSTRUED AND INTERPRETED AS TO VALIDITY, ENFORCEMENT AND IN ALL OTHER RESPECTS
      IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED EXPRESSLY
      CONSENTS TO THE JURISDICTION AND VENUE OF THE SUPREME COURT OF THE STATE OF
      NEW
      YORK, COUNTY OF NEW YORK, AND OF THE UNITED STATES DISTRICT COURT FOR THE
      SOUTHERN DISTRICT OF NEW YORK FOR ALL PURPOSES IN CONNECTION HEREWITH. ANY
      JUDICIAL PROCEEDING BY THE UNDERSIGNED AGAINST LENDER INVOLVING, DIRECTLY OR
      INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR
      CONNECTED HEREWITH SHALL BE BROUGHT ONLY IN THE SUPREME COURT OF THE STATE
      OF
      NEW YORK, COUNTY OF NEW YORK OR THE UNITED STATES DISTRICT COURT FOR THE
      SOUTHERN DISTRICT OF NEW YORK. THE UNDERSIGNED FURTHER CONSENTS THAT ANY
      SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS (INCLUDING, WITHOUT LIMITATION,
      ANY
      NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE AFOREMENTIONED COURTS
      OR
      A JUDGE THEREOF) OR ANY NOTICE IN CONNECTION WITH ANY PROCEEDINGS HEREUNDER,
      MAY
      BE SERVED INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT
      OF
      NEW YORK BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY
      PERSONAL SERVICE PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR
      IN
      SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. THE
      UNDERSIGNED WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION
      INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION
      OR VENUE OR BASED UPON FORUM NON CONVENIENS.

    

    
      
        
        

      

      
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    15. Severability.
      To the
      extent permitted by applicable law, any provision of this Guaranty which is
      prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
      be ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining provisions hereof, and any such prohibition or
      unenforceability in any jurisdiction shall not invalidate or render
      unenforceable such provision in any other jurisdiction.

    

    16. Amendments,
      Waivers.
      No
      amendment or waiver of any provision of this Guaranty nor consent to any
      departure by the undersigned therefrom shall in any event be effective unless
      the same shall be in writing executed by the undersigned and
      Lender.

    

    17. Notice.
      All
      notices, requests and demands to or upon the undersigned, shall be in writing
      and shall be deemed to have been duly given or made (a) when delivered, if
      by
      hand, (b) three (3) days after being sent, postage prepaid, if by registered
      or
      certified mail, (c) when confirmed electronically, if by facsimile, or (d)
      when
      delivered, if by a recognized overnight delivery service in each event, to
      the
      numbers and/or address set forth beneath the signature of the
      undersigned.

    

    18. Successors.
      Lender
      may, from time to time, without notice to the undersigned, sell, assign,
      transfer or otherwise dispose of all or any part of the Obligations and/or
      rights under this Guaranty. Without limiting the generality of the foregoing,
      Lender may assign, or grant participations to, one or more banks, financial
      institutions or other entities all or any part of any of the Obligations. In
      each such event, Lender, its Affiliates and each and every immediate and
      successive purchaser, assignee, transferee or holder of all or any part of
      the
      Obligations shall have the right to enforce this Guaranty, by legal action
      or
      otherwise, for its own benefit as fully as if such purchaser, assignee,
      transferee or holder were herein by name specifically given such right. Lender
      shall have an unimpaired right to enforce this Guaranty for its benefit with
      respect to that portion of the Obligations which Lender has not disposed of,
      sold, assigned, or otherwise transferred.

     

    
      
        
        

      

      
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    19. Release.
      Nothing
      except cash payment in full of the Obligations shall release the undersigned
      from liability under this Guaranty.

    

    IN
      WITNESS WHEREOF, this Guaranty has been executed by the undersigned this 16th
      day of July 2007.

    

    ICELAND
      HEALTH, LLC

    

    
      
        	
                By:

              	
                
                  
                    
                      
                        
                          /s/
                            Alan Kirschbaum

                        

                      

                    

                  

                

              
	
                Name:

              	
                 Alan
                  Kirschbaum

              
	Title:	
                 Chief
                  Financial Officer

              

      

    

     

    Address:
      4 Manhattanville Road

    Purchase,
      NY 10577   

    Telephone
      No.:914-701-4548   

    Facsimile
      No.: 877-270-9170  

    

    
      	STATE
              OF NEW YORK	)
	 	):
              ss.:
	COUNTY
              OF WESTCHESTER	
              )

            

    

     

    On
      the
      16th day of July, 2007 before me personally came Alan J. Kirschbaum to me known,
      who being by me duly sworn, did depose and say he is the Chief Financial Officer
      of Iceland
      Health, LLC the company described in and which executed
      the foregoing instrument; and that he signed his name thereto by order of the
      board of directors of said corporation.

     

    
      
        	 	/s/
                Rosalee J. Golczewski	
              
	 	Notary
                Public

      

    

     

    
       

      
        
          
          

        

        
          8EXHIBIT
      4.1

     

    [FORM
      OF SPECIAL WARRANT]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      TO
      THE HOLDER, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
      IS
      NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
      144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
      PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THE SECURITIES.

     

    WORKSTREAM
      INC.

     

    Special
      Warrant

     

    Warrant
      No.:   

    Date
      of
      Issuance: _________, 2007 (“Issuance
      Date”)

     

    Workstream
      Inc., a
      corporation existing pursuant to the Canada Business Corporations Act
(the
      “Company”),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [MAGNETAR CAPITAL MASTER FUND,
      LTD] [OTHER BUYERS], the registered holder hereof or its permitted assigns
      (the
“Holder”),
      is
      entitled, subject to the terms set forth below, to acquire from the Company,
      at
      the Conversion Price (as defined below) then in effect, upon conversion of
      the
      Conversion Amount (as defined below) of this Special Warrant (including any
      Special Warrants issued in exchange, transfer or replacement hereof, the
“Warrant”),
      at
      any time or times on or after the Issuance Date, but not after 11:59 p.m.,
      Chicago time, on the Expiration Date (as defined below), a number of fully
      paid
      and nonassessable Common Shares (as defined below) as
      determined pursuant to Section 1
      below
      (the “Warrant
      Shares”).
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 16.
      This
      Warrant is one of the Special Warrants (the “Transaction
      Agreement Warrants”)
      issued
      pursuant to Section 1 of that certain Transaction Agreement, dated as of July
      25, 2007, by and among the Company and the investors (the “Buyers”)
      referred to therein (the “Transaction
      Agreement”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              1.

            	
              CONVERSION.

            

    

     

    (a) Mechanics
      of Conversion.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(e)),
      all or
      any portion of the Conversion Amount may be converted by the Holder, from time
      to time, on any day on or after the Issuance Date by delivery of a written
      notice, in the form attached hereto as Exhibit
      A
      (the
“Conversion
      Notice”),
      of
      the Holder’s election to convert the specified portion of the Conversion Amount
      into fully paid and nonassessable Common Shares at the Conversion Rate (as
      defined below) then in effect. The Holder shall not be required to deliver
      the
      original of this Warrant in order to effect a conversion hereunder. Execution
      and delivery of the Conversion Notice with respect to less than all of the
      Conversion Amount shall have the same effect as cancellation of the original
      of
      this Warrant and issuance of a new Warrant evidencing the right to convert
      the
      remaining Conversion Amount. Execution and delivery of the Conversion Notice
      for
      all of the Conversion Amount shall have the same effect as cancellation of
      the
      original of this Warrant after delivery of the Warrant Shares in accordance
      with
      the terms hereof. On or before the second (2nd)
      Business Day following the date on which the Company has received the applicable
      Conversion Notice, the Company shall transmit by facsimile an acknowledgment
      of
      confirmation of receipt of such Conversion Notice to the Holder and the
      Company’s transfer agent (the “Transfer
      Agent”).
      On or
      before the third (3rd)
      Business Day following the date on which the Company has received the applicable
      Conversion Notice (the “Share
      Delivery Date”),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer Program, and the Holder has indicated on its
      Conversion Notice that it intends to immediately sell all or any portion of
      the
      Warrant Shares to be received upon such conversion pursuant
      to the registration statement covering the resale of such Warrant Shares and,
      to
      the extent applicable, in compliance with the prospectus delivery requirements
      of the 1933 Act (as defined in the Transaction Agreement),
      upon the
      request of the Holder, credit such aggregate number of Common Shares to which
      the Holder immediately intends to sell and is entitled pursuant to such
      conversion to the Holder’s or its designee’s balance account with DTC through
      its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer Agent
      is
      not participating in the DTC Fast Automated Securities Transfer Program, issue
      and deliver to the Holder or, at Holder’s instruction pursuant to the Conversion
      Notice, Holder’s agent or designee, in each case, sent by reputable overnight
      courier to the address as specified in the Conversion Notice, a certificate,
      registered in the Company’s share register in the name of the Holder or its
      designee (as indicated in the Conversion Notice), for the number of Common
      Shares to which the Holder is entitled pursuant to such conversion. Upon
      delivery of the applicable Conversion Notice, the Holder shall be deemed for
      all
      corporate purposes to have become the holder of record of the Warrant Shares
      with respect to which this Warrant has been converted, irrespective of the
      date
      such Warrant Shares are credited to the Holder’s DTC account or the date of
      delivery of the certificates evidencing such Warrant Shares, as the case may
      be.
      If this Warrant is submitted in connection with any conversion pursuant to
      this
      Section 1(a)
      and the
      Conversion Amount submitted for conversion is less than the Conversion Amount
      then underlying this Warrant, then the Company shall as soon as practicable
      and
      in no event later than three (3) Business Days after any conversion and at
      its
      own expense, issue and deliver to the Holder (or its designee) a new Warrant
      (in
      accordance with Section 7(d))
      representing the right to convert the remaining Conversion Amount. No fractional
      Common Shares are to be issued upon the conversion of this Warrant, but rather
      the number of Common Shares to be issued shall be rounded up to the nearest
      whole number. The Company shall pay any and all taxes which may be payable
      with
      respect to the issuance and delivery of Warrant Shares upon conversion of this
      Warrant. The Company shall make immediate public announcements for every
      aggregate million dollars of Conversion Amounts that are converted pursuant
      to
      this Section 1(a)
      and
      under the other Transaction Agreement Warrants.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) Conversion
      Price.
      For
      purposes of this Warrant, “Conversion
      Price”
means
      $1.25, subject to adjustment as provided herein.

    (c) Company’s
      Failure to Timely Deliver Securities.
      If the
      Company shall fail, for any reason or for no reason, to issue to the Holder
      within three (3) Business Days of receipt of the applicable Conversion Notice,
      a
      certificate for the number of Common Shares to which the Holder is entitled
      and
      register such Common Shares on the Company’s share register or to credit the
      Holder’s balance account with DTC for such number of Common Shares to which the
      Holder is entitled upon the Holder’s conversion of this Warrant (as the case may
      be) (a “Conversion
      Failure”),
      then,
      in addition to all other remedies available to the Holder, the Company shall
      pay
      in cash to the Holder on each day after such third (3rd)
      Business Day that the issuance of such Common Shares is not timely effected
      an
      amount equal to 1.5% of the product of (A) the sum of the number of Common
      Shares not issued to the Holder on a timely basis and to which the Holder is
      entitled and (B) the VWAP of the Common Shares for the five (5) Trading Day
      period immediately preceding the last possible date which the Company could
      have
      issued such Common Shares to the Holder without violating Section 1(a).
      In
      addition to the foregoing, if within three (3) Trading Days after the Company’s
      receipt of the facsimile copy of a Conversion Notice, the Company shall fail
      to
      issue and deliver a certificate to the Holder and register such Common Shares
      on
      the Company’s share register or credit the Holder’s balance account with DTC for
      the number of Common Shares to which the Holder is entitled upon such Holder’s
      conversion hereunder (as the case may be), and if on or after such third
      (3rd)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) Common
      Shares to deliver in satisfaction of a sale by the Holder of Common Shares
      issuable upon such conversion that the Holder anticipated receiving from the
      Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder’s request and
      in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
      to the Holder’s total purchase price (including brokerage commissions, if any)
      for the Common Shares so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such Common Shares) shall terminate and the Holder shall have no further right
      to such Common Shares or the portion of this Warrant representing such Common
      Shares, or (ii) promptly honor its obligation to deliver to the Holder a
      certificate or certificates representing such Common Shares or credit the
      Holder’s balance account with DTC for the number of Common Shares to which the
      Holder is entitled upon such Holder’s conversion hereunder (as the case may be)
      and pay cash to the Holder in an amount equal to the excess (if any) of the
      Buy-In Price over the product of (A) such number of Common Shares times (B)
      the
      VWAP of the Common Shares for the five (5) Trading Day period immediately
      preceding the date of the Conversion Notice.

     

    (d) Disputes.
      In the
      case of a dispute as to the determination of the Conversion Price or the
      arithmetic calculation of the number of Warrant Shares to be issued pursuant
      to
      the terms hereof, the Company shall promptly issue to the Holder the number
      of
      Warrant Shares that are not disputed and resolve such dispute in accordance
      with
      Section 13.

     

    
      
         

      

      
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    (e) Limitations
      on Conversions. Notwithstanding
      anything to the contrary contained in this Warrant, this Warrant shall not
      be
      convertible by the Holder hereof to the extent (but only to the extent) that,
      if
      convertible by the Holder, the Holder or any of its affiliates would
      beneficially own in excess of 4.99% (the “Maximum
      Percentage”)
      of the
      outstanding Common Shares. To the extent the above limitation applies, the
      determination of whether this Warrant shall be convertible (vis-à-vis other
      convertible, exercisable or exchangeable securities owned by the Holder) and
      of
      which warrants shall be convertible (as among all warrants owned by the Holder)
      shall, subject to such Maximum Percentage limitation, be determined on the
      basis
      of the first submission to the Company for conversion, exercise or exchange
      (as
      the case may be). No prior inability to convert this Warrant pursuant to this
      paragraph shall have any effect on the applicability of the provisions of this
      paragraph with respect to any subsequent determination of convertibility.
      For the purposes of this paragraph, beneficial ownership and all determinations
      and calculations (including, without limitation, with respect to calculations
      of
      percentage ownership) shall be determined by the Holder in accordance with
      Section 13(d) of the 1934 Act (as defined in the Transaction Agreement) and
      the
      rules and regulations promulgated thereunder. The provisions of this paragraph
      shall be implemented in a manner otherwise than in strict conformity with the
      terms of this paragraph to correct this paragraph (or any portion hereof) which
      may be defective or inconsistent with the intended Maximum Percentage beneficial
      ownership limitation herein contained or to make changes or supplements
      necessary or desirable to properly give effect to such Maximum Percentage
      limitation. The limitations contained in this paragraph shall apply to a
      successor Holder of this Warrant. The holders of Common Shares shall
      be third party beneficiaries of this paragraph and the Company may not waive
      this paragraph without the consent of holders of a majority of
      its Common Shares. For purposes of this Warrant, in determining the
      number of outstanding Common Shares, the Holder may rely on the number of
      outstanding Common Shares as reflected in (1) the Company’s most recent Form
      10-K or Form 10-KSB (as the case may be), Form 10-Q or Form 10-QSB (as the
      case
      may be), Current Report on Form 8-K or other public filing with the SEC (as
      the
      case may be), (2) a more recent public announcement by the Company or (3) any
      other notice by the Company or the Transfer Agent setting forth the number
      of
      Common Shares outstanding. For any reason at any time, upon the written or
      oral
      request of the Holder, the Company shall within one (1) Business Day confirm
      orally and in writing to the Holder the number of Common Shares then
      outstanding, including by virtue of any prior conversion or exercise of
      convertible or exercisable securities into Common Shares, including, without
      limitation, pursuant to this Warrant or securities issued pursuant to the
      Transaction Agreement. By written notice to the Company, the Holder may increase
      or decrease the Maximum Percentage to any other percentage not in excess of
      9.99% specified in such notice, provided that (i) any such increase will not
      be
      effective until the sixty-first (61st)
      day
      after such notice is delivered to the Company, and (ii) any such increase or
      decrease will apply only to the Holder and not to any other holder of
      Transaction Agreement Warrants.

     

    (f) Insufficient
      Authorized Shares.
      The
      Company shall at all times keep reserved for issuance under this Warrant a
      number of Common Shares as shall be necessary to satisfy the Company’s
      obligation to issue Common Shares hereunder (without regard to any limitation
      otherwise contained herein with respect to the number of Common Shares that
      may
      be acquirable upon conversion of this Warrant). If, notwithstanding the
      foregoing, and not in limitation thereof, at any time while any of the
      Transaction Agreement Warrants remain outstanding the Company does not have
      a
      sufficient number of authorized and unreserved Common Shares to satisfy its
      obligation to reserve for issuance upon conversion of the Transaction Agreement
      Warrants at least a number of Common Shares equal to the maximum number of
      Common Shares as shall from time to time be necessary to effect the conversion
      of all of the Transaction Agreement Warrants then outstanding (the “Required
      Reserve Amount”)
      (an
“Authorized
      Share Failure”),
      then
      the Company shall immediately take all action necessary to increase the
      Company’s authorized Common Shares to an amount sufficient to allow the Company
      to reserve the Required Reserve Amount for all the Transaction Agreement
      Warrants then outstanding. Without limiting the generality of the foregoing
      sentence, as soon as practicable after the date of the occurrence of an
      Authorized Share Failure, but in no event later than sixty (60) days after
      the
      occurrence of such Authorized Share Failure, the Company shall hold a meeting
      of
      its shareholders for the approval of an increase in the number of authorized
      Common Shares. In connection with such meeting, the Company shall provide each
      shareholder with a proxy statement and shall use its best efforts to solicit
      its
      shareholders’ approval of such increase in authorized Common Shares and to cause
      its board of directors to recommend to the shareholders that they approve such
      proposal.

    
      
         

      

      
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    2. ADJUSTMENT
      OF CONVERSION PRICE.
      The
      Conversion Price and number of Warrant Shares issuable upon conversion of this
      Warrant are subject to adjustment from time to time as set forth in this Section
      2.

     

    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time on or after the date of the Transaction Agreement, (i)
      pays
      a stock dividend on one or more classes of its then outstanding Common Shares
      or
      otherwise makes a distribution on any class of capital stock that is payable
      in
      Common Shares, (ii) subdivides (by any stock split, stock dividend,
      recapitalization or otherwise) one or more classes of its then outstanding
      Common Shares into a larger number of shares or (iii) combines (by combination,
      reverse stock split or otherwise) one or more classes of its then outstanding
      Common Shares into a smaller number of shares, then in each such case the
      Conversion Price shall be multiplied by a fraction of which the numerator shall
      be the number of Common Shares outstanding immediately before such event and
      of
      which the denominator shall be the number of Common Shares outstanding
      immediately after such event. Any adjustment made pursuant to clause (i) of
      this
      paragraph shall become effective immediately after the record date for the
      determination of shareholders entitled to receive such dividend or distribution,
      and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
      become effective immediately after the effective date of such subdivision or
      combination. If any event requiring an adjustment under this paragraph occurs
      during the period that a Conversion Price is calculated hereunder, then the
      calculation of such Conversion Price shall be adjusted appropriately to reflect
      such event.

     

    (b) Adjustment
      Upon Issuance of Common Shares.
      If and
      whenever on or after the date of the Transaction Agreement, the Company issues
      or sells, or in accordance with this Section 2
      is
      deemed to have issued or sold, any Common Shares (including the issuance or
      sale
      of Common Shares owned or held by or for the account of the Company, but
      excluding any Excluded Securities (as defined in the Transaction Agreement)),
      for a consideration per share (the “New
      Issuance Price”)
      less
      than a price (the “Applicable
      Price”)
      equal
      to the Conversion Price in effect immediately prior to such issue or sale or
      deemed issuance or sale (the foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Conversion Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Conversion Price under this Section 2(b),
      the
      following shall be applicable:

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (i) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one Common Shares is issuable upon the exercise of any such Option
      or
      upon conversion, exercise or exchange of any Convertible Securities issuable
      upon exercise of any such Option is less than the Applicable Price, then such
      Common Share shall be deemed to be outstanding and to have been issued and
      sold
      by the Company at the time of the granting or sale of such Option for such
      price
      per share. For purposes of this Section 2(b)(i),
      the
“lowest price per share for which one Common Share is issuable upon the exercise
      of any such Options or upon conversion, exercise or exchange of any Convertible
      Securities issuable upon exercise of any such Option” shall be equal to the sum
      of the lowest amounts of consideration (if any) received or receivable by the
      Company with respect to any one Common Share upon the granting or sale of the
      Option, upon exercise of the Option and upon conversion, exercise or exchange
      of
      any Convertible Security issuable upon exercise of such Option. Except as
      contemplated below, no further adjustment of the Conversion Price shall be
      made
      upon the actual issuance of such Common Shares or of such Convertible Securities
      upon the exercise of such Options or upon the actual issuance of such Common
      Shares upon conversion, exercise or exchange of such Convertible
      Securities.

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one Common Share is issuable upon the conversion,
      exercise or exchange thereof is less than the Applicable Price, then such Common
      Share shall be deemed to be outstanding and to have been issued and sold by
      the
      Company at the time of the issuance or sale of such Convertible Securities
      for
      such price per share. For the purposes of this Section 2(b)(ii),
      the
“lowest price per share for which one Common Share is issuable upon the
      conversion, exercise or exchange thereof” shall be equal to the sum of the
      lowest amounts of consideration (if any) received or receivable by the Company
      with respect to one Common Share upon the issuance or sale of the Convertible
      Security and upon conversion, exercise or exchange of such Convertible Security.
      Except as contemplated below, no further adjustment of the Conversion Price
      shall be made upon the actual issuance of such Common Shares upon conversion,
      exercise or exchange of such Convertible Securities, and if any such issue
      or
      sale of such Convertible Securities is made upon exercise of any Options for
      which adjustment of this Warrant has been or is to be made pursuant to other
      provisions of this Section 2(b),
      except
      as contemplated below, no further adjustment of the Conversion Price shall
      be
      made by reason of such issue or sale. 

     

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase or exercise price provided for in any Options, the additional
      consideration, if any, payable upon the issue, conversion, exercise or exchange
      of any Convertible Securities, or the rate at which any Convertible Securities
      are convertible into or exercisable or exchangeable for Common Shares increases
      or decreases at any time, the Conversion Price in effect at the time of such
      increase or decrease shall be adjusted to the Conversion Price which would
      have
      been in effect at such time had such Options or Convertible Securities provided
      for such increased or decreased purchase price, additional consideration or
      increased or decreased conversion rate, as the case may be, at the time
      initially granted, issued or sold. For purposes of this Section 2(b)(iii),
      if the
      terms of any Option or Convertible Security that was outstanding as of the
      date
      of issuance of this Warrant are increased or decreased in the manner described
      in the immediately preceding sentence, then such Option or Convertible Security
      and the Common Shares deemed issuable upon exercise, conversion or exchange
      thereof shall be deemed to have been issued as of the date of such increase
      or
      decrease. No adjustment pursuant to this Section 2(b)
      shall be
      made if such adjustment would result in an increase of the Conversion Price
      then
      in effect.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any Common
      Shares, Options or Convertible Securities are issued or sold or deemed to have
      been issued or sold for cash, the consideration received therefor will be deemed
      to be the net amount received by the Company therefor. If any Common Shares,
      Options or Convertible Securities are issued or sold for a consideration other
      than cash, the amount of such consideration received by the Company will be
      the
      fair value of such consideration, except where such consideration consists
      of
      securities, in which case the amount of consideration received by the Company
      for each such security will be the VWAP of such security for the five (5)
      Trading Day period immediately preceding the date of receipt. If any Common
      Shares, Options or Convertible Securities are issued to the owners of the
      non-surviving entity in connection with any merger in which the Company is
      the
      surviving entity, the amount of consideration therefor will be deemed to be
      the
      fair value of such portion of the net assets and business of the non-surviving
      entity as is attributable to such Common Shares, Options or Convertible
      Securities, as the case may be. The fair value of any consideration other than
      cash or securities will be determined jointly by the Company and the Holder.
      If
      such parties are unable to reach agreement within ten (10) days after the
      occurrence of an event requiring valuation (the “Valuation
      Event”),
      the
      fair value of such consideration will be determined within five (5) Trading
      Days
      after the tenth (10th)
      day
      following such Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Holder. The determination of such appraiser
      shall be final and binding upon all parties absent manifest error and the fees
      and expenses of such appraiser shall be borne by the Company.

    (v) Record
      Date.
      If the
      Company takes a record of the holders of Common Shares for the purpose of
      entitling them (A) to receive a dividend or other distribution payable in
      Common Shares, Options or in Convertible Securities or (B) to subscribe for
      or purchase Common Shares, Options or Convertible Securities, then such record
      date will be deemed to be the date of the issue or sale of the Common Shares
      deemed to have been issued or sold upon the declaration of such dividend or
      the
      making of such other distribution or the date of the granting of such right
      of
      subscription or purchase (as the case may be).

     

    (vi) Floor
      Price.
      No
      adjustment pursuant to Section 2(b)
      shall
      cause the Exercise Price to be less than $1.21 (the “Floor
      Price”),
      as
      adjusted for any stock dividend, stock split, stock combination,
      reclassification or similar transaction. The Company shall not directly or
      indirectly issue or sell, or, in accordance with this Section 2,
      be
      deemed to have issued or sold, any Common Shares (other than Excluded
      Securities) for less than the Floor Price at any time while this Warrant is
      outstanding without the prior written consent of the Holder, which consent
      may
      be granted or withheld in the Holder’s sole discretion. In
      no
      event shall any Excluded Securities be issued, or be deemed to be issued as
      contemplated hereby, for less than the fair market value of the Common Shares
      at
      the time such Excluded Securities are so issued or are so deemed to be
      issued.

     

    
      
         

      

      
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    (c) Other
      Events.
      In the
      event that the Company (or any direct or indirect subsidiary thereof) shall
      take any action to which the provisions hereof are not strictly applicable,
      or,
      if applicable, would not operate to protect the Holder from dilution or if
      any
      event occurs of the type contemplated by the provisions of this Section
2
      but not
      expressly provided for by such provisions (including, without limitation, the
      granting of stock appreciation rights, phantom stock rights or other rights
      with
      equity features), then the Company’s Board of Directors shall in good faith
      determine and implement an appropriate adjustment in the Conversion Price so
      as
      to protect the rights of the Holder; provided that no such adjustment pursuant
      to this Section 2(c)
      will
      increase the Conversion Price, provided further that if the Holder does not
      accept such adjustments as appropriately protecting its interests hereunder
      against such dilution, then the Company’s Board of Directors and the Holder
      shall agree, in good faith, upon an independent investment bank of nationally
      recognized standing to make such appropriate adjustments, whose determination
      shall be final and binding and whose fees and expenses shall be borne by the
      Company.

    (d) Calculations.
      All
      calculations under this Section 2
      shall be
      made to the nearest cent or the nearest 1/100th
      of a
      share, as applicable. The number of Common Shares outstanding at any given
      time
      shall not include shares owned or held by or for the account of the Company,
      and
      the disposition of any such shares shall be considered an issue or sale of
      Common Shares.

     

    3. RIGHTS
      UPON DISTRIBUTION OF ASSETS.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of Common Shares, by way of return
      of capital or otherwise (including, without limitation, any distribution of
      cash, stock or other securities, property or options by way of a dividend,
      spin
      off, reclassification, corporate rearrangement, scheme of arrangement or other
      similar transaction) (a “Distribution”),
      at
      any time after the issuance of this Warrant, then, in each such case, the Holder
      shall be entitled to participate in such Distribution to the same extent that
      the Holder would have participated therein if the Holder had held the number
      of
      Common Shares acquirable upon complete conversion of this Warrant (without
      regard to any limitations on conversion hereof, including without limitation,
      the Maximum Percentage) immediately before the date on which a record is taken
      for such Distribution, or, if no such record is taken, the date as of which
      the
      record holders of Common Shares are to be determined for the participation
      in
      such Distribution (provided, however, that to the extent that the Holder’s right
      to participate in any such Distributions would result in the Holder exceeding
      the Maximum Percentage, then the Holder shall not be entitled to participate
      in
      such Distribution to such extent (or the beneficial ownership of any such Common
      Shares as a result of such Distribution to such extent) and such Distribution
      to
      such extent shall be held in abeyance for the benefit of the Holder until such
      time, if ever, as its right thereto would not result in the Holder exceeding
      the
      Maximum Percentage).

     

    
      
         

      

      
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              4.

            	
              PURCHASE
                RIGHTS; FUNDAMENTAL TRANSACTIONS.

            

    

     

    (a) Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2
      above,
      if at any time the Company grants, issues or sells any Options, Convertible
      Securities or rights to purchase stock, warrants, securities or other property
      pro rata to all of the record holders of any class of Common Shares (the
“Purchase
      Rights”),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of Common Shares acquirable upon
      complete conversion of this Warrant (without regard to any limitations on
      conversion hereof, including without limitation, the Maximum Percentage)
      immediately before the date on which a record is taken for the grant, issuance
      or sale of such Purchase Rights, or, if no such record is taken, the date as
      of
      which the record holders of Common Shares are to be determined for the grant,
      issue or sale of such Purchase Rights (provided, however, that to the extent
      that the Holder’s right to participate in any such Purchase Right would result
      in the Holder exceeding the Maximum Percentage, then the Holder shall not be
      entitled to participate in such Purchase Right to such extent (or beneficial
      ownership of such Common Shares as a result of such Purchase Right to such
      extent) and such Purchase Right to such extent shall be held in abeyance for
      the
      Holder until such time, if ever, as its right thereto would not result in the
      Holder exceeding the Maximum Percentage).

    (b) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      the
      Successor Entity assumes in writing all of the obligations of the Company under
      this Warrant and the other Transaction Documents (as defined in the Transaction
      Agreement) in accordance with the provisions of this Section 4(b)
      pursuant
      to written agreements in form and substance reasonably satisfactory to the
      Holder and approved by the Holder prior to such Fundamental Transaction,
      including agreements to deliver to the Holder in exchange for this Warrant
      a
      security of the Successor Entity evidenced by a written instrument substantially
      similar in form and substance to this Warrant, including, without limitation,
      which is convertible for a corresponding number of shares of capital stock
      equivalent to the Common Shares acquirable and receivable upon conversion of
      this Warrant (without regard to any limitations on the conversion of this
      Warrant) prior to such Fundamental Transaction, and with a conversion price
      which applies the conversion price hereunder to such shares of capital stock
      (but taking into account the relative value of the Common Shares pursuant to
      such Fundamental Transaction and the value of such shares of capital stock,
      such
      adjustments to the number of shares of capital stock and such conversion price
      being for the purpose of protecting the economic value of this Warrant
      immediately prior to the consummation of such Fundamental Transaction), and
      which is reasonably satisfactory in form and substance to the Holder. Upon
      the
      occurrence of any Fundamental Transaction, the Successor Entity shall succeed
      to, and be substituted for (so that from and after the date of such Fundamental
      Transaction, the provisions of this Warrant and the other Transaction Documents
      referring to the “Company” shall refer instead to the Successor Entity), and may
      exercise every right and power of the Company and shall assume all of the
      obligations of the Company under this Warrant and the other Transaction
      Documents with the same effect as if such Successor Entity had been named as
      the
      Company herein. Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      conversion of this Warrant at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      Common Shares (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Sections 3
      and
4(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the conversion of this Warrant
      prior
      to
      such Fundamental Transaction,
      such
      shares of the publicly traded Common Shares (or its equivalent) of the Successor
      Entity (including its Parent Entity) which the Holder would have been entitled
      to receive upon the happening of such Fundamental Transaction had this
Warrant
      been
      converted immediately prior to such Fundamental Transaction (without
      regard to any limitations on the conversion of this Warrant),
      as
      adjusted in accordance with the provisions of this Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of Common
      Shares are entitled to receive securities or other assets with respect to or
      in
      exchange for Common Shares (a “Corporate
      Event”),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Warrant
at
      any
      time after the consummation of
      the
      Fundamental Transaction but
      prior
      to the Expiration Date,
      in lieu
      of the Common Shares (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Sections 3
      and
4(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the conversion of the Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been converted immediately prior to such Fundamental
      Transaction (without
      regard to any limitations on the conversion of this Warrant).
      Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Holder. The provisions of this Section
4
      shall
      apply similarly and equally to successive Fundamental Transactions and Corporate
      Events and shall be applied as if this Warrant (and any such subsequent
      warrants) were fully convertible and without regard to any limitations on the
      conversion of this Warrant (provided that the Holder shall continue to be
      entitled to the benefit of the Maximum Percentage, applied however with respect
      to shares of capital stock registered under the 1934 Act and thereafter
      receivable upon conversion of this Warrant (or any such other
      warrant)).

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c) Fundamental
      Transaction Purchase.
      Notwithstanding the foregoing and the provisions of Section 4(b)
      above,
      in the event of a Fundamental Transaction (other than a Fundamental Transaction
      resulting from a (i) merger completed in order to change the domicile of the
      Company to a state of the United States or (ii) merger or consolidation in
      which
      the Company is the surviving entity, the Common Shares continue to be publicly
      traded following such merger or consolidation and an amount of Common Shares
      which is less than 20% of the Company’s issued and outstanding Common Shares
      outstanding immediately prior to such merger or consolidation are issued in
      connection with such merger or consolidation), if the Holder has not converted
      this Warrant in full prior to the consummation of such Fundamental Transaction,
      at the request of the Holder delivered before on or prior to the ninetieth
      (90th)
      day
      after the consummation of such Fundamental Transaction, the Company or the
      Successor Entity (as the case may be) shall purchase
      this Warrant from the Holder by paying to the Holder
      cash in
      an amount equal to 135% of the Conversion Amount.

     

    5. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Articles of Incorporation, Bylaws or through any reorganization, transfer
      of
      assets, consolidation, merger, scheme of arrangement, dissolution, issue or
      sale
      of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any Common Shares receivable upon the conversion of this Warrant above
      the Conversion Price then in effect, (ii) shall take all such actions as
      may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable Common Shares upon the conversion
      of
      this Warrant, and (iii) shall, so long as any of the Transaction Agreement
      Warrants are outstanding, take all action necessary to reserve and keep
      available out of its authorized and unissued Common Shares, solely for the
      purpose of effecting the conversion of the Transaction Agreement Warrants,
      the
      maximum number of Common Shares as shall from time to time be necessary to
      effect the conversion of the Transaction Agreement Warrants then outstanding
      (without regard to any limitations on conversion).

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    6. WARRANT
      HOLDER NOT DEEMED A SHAREHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person’s
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
      any of the rights of a shareholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due conversion of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon
      conversion of this Warrant or otherwise) or as a shareholder of the Company,
      whether such liabilities are asserted by the Company or by creditors of the
      Company. Notwithstanding this Section 6,
      the
      Company shall provide the Holder with copies of the same notices and other
      information given to the shareholders of the Company generally,
      contemporaneously with the giving thereof to the shareholders.

    7. REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 7(d)),
      registered as the Holder may request, representing the right to convert the
      portion of the Conversion Amount of this Warrant being transferred by the Holder
      and, if less than the full Conversion Amount then underlying this Warrant is
      being transferred, a new Warrant (in accordance with Section 7(d))
      to the
      Holder representing the right to convert the portion of the Conversion Amount
      of
      this Warrant not being transferred.

     

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant (as to which a written
      certification and the indemnification contemplated below shall suffice as such
      evidence), and, in the case of loss, theft or destruction, of any
      indemnification undertaking by the Holder to the Company in customary and
      reasonable form and, in the case of mutilation, upon surrender and cancellation
      of this Warrant, the Company shall execute and deliver to the Holder a new
      Warrant (in accordance with Section 7(d))
      representing the right to convert the Conversion Amount then underlying this
      Warrant.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 7(d))
      representing in the aggregate the right to convert the Conversion Amount then
      underlying this Warrant, and each such new Warrant will represent the right
      to
      convert such portion of the Conversion Amount as is designated by the Holder
      at
      the time of such surrender.

     

    (d) Issuance
      of New Warrants.
      Whenever
      the Company is required to issue a new Warrant pursuant to the terms of this
      Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii)
      shall represent, as indicated on the face of such new Warrant, the right to
      convert the Conversion Amount then underlying this Warrant (or in the case
      of a
      new Warrant being issued pursuant to Section 7(a)
      or
      Section 7(c),
      the
      Conversion Amount designated by the Holder which, when added to the Conversion
      Amounts underlying the other new Warrants issued in connection with such
      issuance, does not exceed the Conversion Amount then underlying this Warrant),
      (iii) shall have an issuance date, as indicated on the face of such new Warrant
      which is the same as the Issuance Date, and (iv) shall have the same rights
      and
      conditions as this Warrant.

    8. NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Transaction Agreement. The Company shall provide the Holder with prompt
      written notice of all actions taken pursuant to this Warrant, including in
      reasonable detail a description of such action and the reason therefor. Without
      limiting the generality of the foregoing, the Company will give written notice
      to the Holder (i) immediately upon each adjustment of the Conversion Price
      and
      the number of Warrant Shares, setting forth in reasonable detail, and
      certifying, the calculation of such adjustment(s) and (ii) at least fifteen
      (15)
      days prior to the date on which the Company closes its books or takes a record
      (A) with respect to any dividend or distribution upon the Common Shares, (B)
      with respect to any grants, issuances or sales of any Options, Convertible
      Securities or rights to purchase stock, warrants, securities or other property
      pro rata to the holders of all of the Common Shares or (C) for determining
      rights to vote with respect to any Fundamental Transaction, dissolution or
      liquidation, provided in each case that such information shall be made known
      to
      the public prior to or in conjunction with such notice being provided to the
      Holder and (iii) at least ten (10) Trading Days prior to the consummation of
      any
      Fundamental Transaction (excluding any Fundamental Transaction for which the
      Company does not have prior knowledge or notice). To the extent that any notice
      provided hereunder constitutes, or contains, material, non-public information
      regarding the Company or any of its Subsidiaries (as defined in the Transaction
      Agreement), the Company shall simultaneously file such notice with the SEC
      (as
      defined in the Transaction Agreement) pursuant to a Current Report on Form
      8-K.

     

    9. AMENDMENT
      AND WAIVER.
      Except
      as otherwise provided herein, the provisions of this Warrant (other than Section
      1(e))
      may be
      amended and the Company may take any action herein prohibited, or omit to
      perform any act herein required to be performed by it, only if the Company
      has
      obtained the written consent of the Holder. The Holder shall be entitled, at
      its
      option, to the benefit of any amendment of any other similar warrant issued
      under the Transaction Agreement.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    10. SEVERABILITY.
      If any
      provision of this Warrant or the application thereof becomes or is declared
      by a
      court of competent jurisdiction to be illegal, void or unenforceable, the
      remainder of the terms of this Warrant will continue in full force and
      effect.

     

    11. GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accor-dance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of Illinois, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of Illinois or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of Illinois.

     

    12. CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and the Holder
      and
      shall not be construed against any Person as the drafter hereof. The headings
      of
      this Warrant are for convenience of reference and shall not form part of, or
      affect the interpretation of, this Warrant.

     

    13. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Conversion Price or fair market
      value or the arithmetic calculation of the Warrant Shares, the Company or the
      Holder (as the case may be) shall submit the disputed determinations or
      arithmetic calculations (as the case may be) via facsimile within two (2)
      Business Days of receipt of the applicable notice giving rise to such dispute
      to
      the Company or the Holder (as the case may be). If the Holder and the Company
      are unable to agree upon such determination or calculation of the Conversion
      Price or fair market value or the number of Warrant Shares (as the case may
      be)
      within three (3) Business Days of such disputed determination or arithmetic
      calculation being submitted to the Company or the Holder (as the case may be),
      then the Company shall, within two (2) Business Days submit via facsimile (a)
      the disputed determination of the Conversion Price or fair market value to
      an
      independent, reputable investment bank selected by the Company and approved
      by
      the Holder or (b) the disputed arithmetic calculation of the Warrant Shares
      to
      the Company’s independent, outside accountant. The Company shall cause at its
      expense the investment bank or the accountant (as the case may be) to perform
      the determinations or calculations (as the case may be) and notify the Company
      and the Holder of the results no later than ten (10) Business Days from the
      time
      it receives such disputed determinations or calculations (as the case may be).
      Such investment bank’s or accountant’s determination or calculation (as the case
      may be) shall be binding upon all parties absent demonstrable
      error.

    14. REMEDIES,
      OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      to
      pursue actual damages for any failure by the Company to comply with the terms
      of
      this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required. The issuance of shares and
      certificates for shares as contemplated hereby upon the conversion of this
      Warrant shall be made without charge to the Holder or such shares for any
      issuance tax or other costs in respect thereof, provided that the Company shall
      not be required to pay any tax which may be payable in respect of any transfer
      involved in the issuance and delivery of any certificate in a name other than
      the Holder or its agent on its behalf.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    15. TRANSFER. This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(g)
      of
      the Transaction Agreement.
      In
      connection with any such transfer, the Holder shall be entitled to disclose
      to
      the transferee any information about the Company, its Subsidiaries, and its
      and
      their securities, in the Holder’s possession. This Warrant shall not be
      transferred (other than to an affiliate of the Holder) unless and until the
      Company has received the opinion of counsel for the Holder (if so requested
      by
      the Company) that the securities may be transferred pursuant to an exemption
      from registration under the 1933 Act and applicable state securities laws,
      the
      availability of which is established to the reasonable satisfaction of the
      Company.

     

    16. CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a) “Bloomberg”
means
      Bloomberg Financial Markets.

     

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

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

     

    (d) “Conversion
      Amount”
means
      the Special Warrant Purchase Price.

     

    (e) “Conversion
      Date”
means
      the date set forth in the applicable Conversion Notice.

     

    (f) “Conversion
      Rate”
means
      the quotient of (i) the Conversion Amount specified for conversion in the
      applicable Conversion Notice divided by (ii) the Conversion Price.

     

    (g) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for Common Shares.

     

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

     

    (i) “Equity
      Conditions”
means:
      (i) on each day during the period beginning one month prior to the applicable
      date of determination and ending on and including the applicable date of
      determination either
      (x) the applicable Registration Statement filed pursuant to the Registration
      Rights Agreement shall be effective and the prospectus contained therein shall
      be available for the resale of all of the Registrable Securities in accordance
      with the terms of the Registration Rights Agreement or (y) all Registrable
      Securities shall be eligible for sale without restriction and without the need
      for registration under any applicable federal or state securities laws (in
      each
      case, disregarding any limitation on conversion or exercise contained
      therein);
      (ii) on
      each day during the period beginning three months prior to the applicable date
      of determination and ending and including the applicable date of determination
      (the “Equity
      Conditions Measuring Period”),
      the
      Common Shares (including all Registrable Securities)
      are
      listed or designated for quotation on an Eligible Market and shall not have
      been
      suspended from trading on an Eligible Market (other than suspensions of not
      more
      than two (2) days and occurring prior to the applicable date of determination
      due to business announcements by the Company) nor shall delisting or suspension
      by an Eligible Market have been threatened (with a reasonable prospect of
      delisting occurring) or pending either (A) in writing by such Eligible Market
      or
      (B) by falling below the minimum listing maintenance requirements of the
      Eligible Market on which the Common Shares are then listed; (iii) on each day
      during the Equity Conditions Measuring Period, the Company shall have delivered
      Common Shares upon conversion of this Warrant on a timely basis as set forth
      in
      Section 1(a)
      hereof
      and all other shares of capital stock required to be delivered by the Company
      on
      a timely basis as set forth in the other Transaction Documents; (iv) any Common
      Shares to be issued in connection with the event requiring determination may
      be
      issued in full without violating Section 1(e)
      hereof
      or the rules or regulations of the Eligible Market on which the Common Shares
      are then listed; (v) on each day during the Equity Conditions Measuring Period,
      no public announcement of a pending, proposed or intended Fundamental
      Transaction shall have occurred which has not been abandoned, terminated or
      consummated; (vi)
      the Company shall have no knowledge of any fact that would reasonably be
      expected to cause (1) the applicable Registration Statement required to be
      filed
      pursuant to the Registration Rights Agreement not to be effective or the
      prospectus contained therein not to be available for the resale of at least
      all
      of the Registrable Securities in accordance with the terms of the Registration
      Rights Agreement or (2) any Registrable Securities not to be eligible for sale
      without restriction pursuant to Rule 144(k) under the 1933 Act and any
      applicable state securities laws (in each case, disregarding any limitation
      on
      conversion or exercise contained therein); (vii) the Holder shall not be in
      (and
      no other Buyer shall be in) possession of any material, non-public information
      provided to any of them by the Company or any of its affiliates; (viii)
on
      each
      day during the Equity Conditions Measuring Period, the Company otherwise shall
      have been in material compliance with and shall not have breached any provision,
      covenant, representation or warranty of any Transaction Document; (ix)
the
      Common Shares are traded at a price equal to or greater than the Trigger Price
      (as defined below) (as adjusted for stock splits, combinations and the like)
      and
      (x) on
      each
      day during the Equity Conditions Measuring Period, there shall not have occurred
      a Triggering Event or an Other Event or an event that with the passage of time
      or giving of notice would constitute a
      Triggering Event or
      an
      Other Event.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (j) “Expiration
      Date”
means
      the date that is the five (5) year anniversary of the Issuance Date or, if
      such
      date falls on a day other than a Business Day or on which trading does not
      take
      place on the Principal Market (a “Holiday”),
      the
      next date that is not a Holiday. 

     

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

     

    (l) “Options”
means
      any rights, warrants or options to subscribe for or purchase Common Shares
      or
      Convertible Securities.

     

    (m) “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

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

    (o) “Principal
      Market”
means
      The Nasdaq Capital Market and the Boston Stock Exchange.

     

    (p) “Special
      Warrant Purchase Price”
shall
      mean $____________.

     

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

     

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

     

    (s) “VWAP”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market (or, if the Principal Market is not the
      principal trading market for such security, then on the principal securities
      exchange or securities market on which such security is then traded) during
      the
      period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m.,
      New
      York time, as reported by Bloomberg through its “Volume at Price” function or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30:01 a.m., New York time,
      and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
      no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
      Inc.). If VWAP cannot be calculated for such security on such date on any of
      the
      foregoing bases, the VWAP of such security on such date shall be the fair market
      value as mutually determined by the Company and the Holder. If the Company
      and
      the Holder are unable to agree upon the fair market value of such security,
      then
      such dispute shall be resolved in accordance with the procedures in Section
      13.
      All
      such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    17. REDEMPTION
      UPON OCCURRENCE OF TRIGGERING EVENT.

     

    (a) Triggering
      Event. A “Triggering
      Event”
shall
      be deemed to have occurred at such time as any of the following events
      occur:

     

    (i) the
      failure of the applicable Registration Statement to be filed with the SEC on
      or
      prior to the date that is thirty (30) days after the applicable Filing Deadline
      (as defined in the Registration Rights Agreement), or the failure of the
      applicable Registration Statement to be declared effective by the SEC on or
      prior to the date that is sixty (60) days after the applicable Effectiveness
      Deadline (as defined in the Registration Rights Agreement);

    (ii) while
      the
      applicable Registration Statement is required to be maintained effective
      pursuant to the terms of the Registration Rights Agreement, the effectiveness
      of
      the applicable Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to the Holder or
      any
      holder of any Transaction Agreement Warrants for sale of all of the Registrable
      Securities in accordance with the terms of the Registration Rights Agreement,
      and such lapse or unavailability continues for a period of ten (10) consecutive
      Trading Days or for more than an aggregate of fifteen (15) Trading Days in
      any
      365-day period (excluding days during an Allowable Grace Period (as defined
      in
      the Registration Rights Agreement));

     

    (iii) the
      suspension from trading or failure of the Common Shares to be listed on an
      Eligible Market for a period of five (5) consecutive Trading Days or for more
      than an aggregate of ten (10) days in any 365-day period;

     

    (iv) the
      delisting or suspension or threatened or proposed delisting or suspension of
      the
      Common Shares from an Eligible Market, provided that immediately following
      such
      delisting or suspension or such threatened or proposed delisting or suspension
      the Common Shares would not be listed on a prescribed stock exchange for
      purposes of Regulations 3200 or 3201 to the Income Tax Act
      (Canada);

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    (v) the
      Company’s (A) failure to cure a Conversion Failure by delivery of the required
      number of Common Shares within five (5) Trading Days after the applicable
      Conversion Date under this Warrant or any other Transaction Agreement Warrant
      or
      (B) notice, written or oral, to the Holder or any other holder of a Transaction
      Agreement Warrant, including by way of public announcement or through any of
      its
      agents, at any time, of its intention not to comply, as required, with a request
      for conversion of any portion of this Warrant that is requested in accordance
      with the provisions of this Warrant or for conversion of any portion of any
      Transaction Agreement Warrant that is requested in accordance with the
      provisions of such Transaction Agreement Warrant;

     

    (vi) the
      Company’s failure to pay to the Holder or any holder of any of the Transaction
      Agreement Warrants any amounts when and as due pursuant to this Warrant or
      any
      other Transaction Document, and any such failure continues uncured for at least
      ten (10) days;

     

    (vii) the
      Company fails to remove any restrictive legend on any certificate or any Common
      Shares issued to the Holder upon conversion or exercise (as the case may be)
      of
      any Securities acquired by the Holder under the Transaction Agreement (including
      this Warrant) as and when required by such Securities, the Transaction Agreement
      or the Registration Rights Agreement, and any such failure continues uncured
      for
      at least five (5) days;

    (viii) the
      Company fails to remove any restrictive legend on any certificate or any Common
      Shares issued to any holder upon conversion or exercise (as the case may be)
      of
      any Securities acquired by such holder under the Transaction Agreement
      (including any other Transaction Agreement Warrant) as and when required by
      such
      Securities, the Transaction Agreement or the Registration Rights Agreement,
      and
      any such failure continues uncured for five (5) days;

     

    (ix) any
      Triggering Event (as defined in the other Transaction Agreement Warrants) occurs
      with respect to any other Transaction Agreement Warrant; 

     

    (x) Deepak
      Gupta ceases to serve (whether by resignation and/or termination, other than
      “for cause” termination by the Company) as Chief Executive Officer of the
      Company; or

     

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

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (b) Redemption
      Option Upon Triggering Event. In addition to all other rights of the Holder
      contained herein, after a Triggering Event, the Holder shall have the right,
      at
      the Holder’s option to require the Company to redeem all or any portion of the
      Conversion Amount of this Warrant at a price equal to the greater of 130% of
      (x)
      such Conversion Amount and (y) the product of (A) the Conversion Rate in effect
      at such time as such Holder delivers a Notice of Redemption at Option of Holder
      (as defined below) and (B) the VWAP of the Common Shares for the five (5)
      Trading Day period immediately preceding such Triggering Event (the
“Triggering
      Event Redemption Price”).
      Notwithstanding anything contained in this Section 17
      to the
      contrary, upon the occurrence of the Triggering Event specified in Section
      17(a)(iv),
      (i) the
      Holder shall be deemed to have automatically delivered a Notice of Redemption
      at
      Option of Holder to the Company with respect thereto on the day immediately
      preceding the date on which the Common Shares will cease to be listed on a
      prescribed stock exchange for purposes of Regulations 3200 or 3201 to the Income
      Tax Act (Canada) for the entire Conversion Amount then underlying this Warrant,
      (ii) this Warrant shall be deemed to have been redeemed by the Company
      simultaneously with such deemed delivery of such Notice of Redemption at Option
      of Holder, (iii) the Company shall pay the Holder the Triggering Event
      Redemption Price on the date such Notice of Redemption at Option of Holder
      is
      deemed so delivered and (iv) such Notice of Redemption at Option of Holder
      shall
      not be voidable by the Holder pursuant to Section 17(e)
      below.

     

    (c) Mechanics
      of Redemption at Option of Holder. Within one (1) Business Day after the
      occurrence of a Triggering Event, the Company shall deliver written notice
      thereof via facsimile and overnight courier (“Notice
      of Triggering Event”)
      to the
      Holder. At any time after the earlier of the Holder’s receipt of a Notice of
      Triggering Event and the Holder becoming aware of a Triggering Event, the Holder
      may require the Company to redeem up to all of the Conversion Amount by
      delivering written notice thereof via facsimile (“Notice
      of Redemption at Option of Holder”)
      to the
      Company, which Notice of Redemption at Option of Holder shall indicate the
      portion of the Conversion Amount of this Warrant that the Holder is electing
      to
      redeem.

    (d) Payment
      of Triggering Event Redemption Price.
      The
      Company shall deliver on the fifth (5th)
      Business Day after the Company’s receipt of the Notice of Redemption at Option
      of Holder the Triggering Event Redemption Price to the Holder. The Triggering
      Event Redemption Price shall be payable in cash by wire transfer of immediately
      available funds. The Company agrees that in the event of the Company’s
      redemption of any portion of this Warrant under this Section 17,
      the
      Holder’s damages would be uncertain and difficult to estimate because of the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder. Accordingly, any redemption premium due under this Section
      17
      is
      intended by the parties to be, and shall be deemed, a reasonable estimate of
      the
      Holder’s actual loss of its investment opportunity and not as a
      penalty.

     

    (e) Void
      Redemption. In the event that the Company does not pay the Triggering Event
      Redemption Price in full within the time period set forth in Section
17(d),
      at any
      time thereafter and until the Company pays such unpaid Triggering Event
      Redemption Price in full, the Holder shall have the option to, in lieu of
      redemption, void its Notice of Redemption at Option of Holder by sending written
      notice thereof to the Company via facsimile (the “Void
      Optional Redemption Notice”).
      Upon
      the Company’s receipt of such Void Optional Redemption Notice, the Notice of
      Redemption at Option of Holder shall be null and void with respect to the
      portion of this Warrant subject to the Void Optional Redemption
      Notice.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    (f) Disputes;
      Miscellaneous. In the event of a dispute as to the determination of the
      arithmetic calculation of the Triggering Event Redemption Price, such dispute
      shall be resolved pursuant to Section 13
      above
      with the term “Triggering Event Redemption Price” being substituted for the term
“Conversion Price.” A Holder’s delivery of a Void Optional Redemption Notice and
      exercise of its rights following such notice shall not affect the Company’s
      obligations to make any payments which have accrued prior to the date of such
      notice. In the event of a redemption pursuant to this Section 17
      of less
      than all of the Conversion Amount of this Warrant, the Company shall promptly
      cause to be issued and delivered to the Holder a new Warrant representing the
      remaining Conversion Amount of this Warrant which has not been redeemed, if
      necessary.

     

    18. COMPANY
      REPURCHASE OF WARRANT.

     

    (a) Repurchase.
      In addition to all other rights of the Holder contained herein, at any time
      after the (i) fourth (4th)
      anniversary of the Issuance Date and up to and including the Expiration Date
      or
      (ii) occurrence of any Other Event (as defined below), the Holder shall have
      the
      right, at the Holder’s option to require the Company to purchase the entire
      unconverted portion of this Warrant from the Holder at a price equal to the
      fair
      market value thereof on the date set forth in the Holder’s Notice of Repurchase
      at Option of Holder (as defined below). Such fair market value shall be
      determined by an independent, reputable investment bank selected by the Company
      and approved by the Holder, and such investment bank shall be selected by the
      Company within ten (10) Business Days after the Company’s receipt of the Notice
      of Repurchase at Option of Holder. The Company shall cause, at its expense,
      the
      investment bank to perform such determination and to notify the Company and
      the
      Holder of the results no later than twenty (20) Business Days from the time
      it
      is so selected pursuant to the foregoing. Such investment bank’s determination
      shall be binding upon all parties absent demonstrable error. If such investment
      bank is not selected or its determination is not completed prior to the
      Expiration Date or the Company has not paid the Repurchase Price (as defined
      below) in full to the Holder by the Expiration Date, then such Expiration Date
      shall be automatically extended until the Company pays the Repurchase Price
      in
      full to the Holder.

    (b) Mechanics
      of Repurchase. The Holder may exercise its right under Section 18(a)
      by
      delivering written notice thereof via facsimile (“Notice
      of Repurchase at Option of Holder”)
      to the
      Company.

     

    (c) Payment
      of Repurchase Price. The Company shall deliver to the Holder on the thirtieth
      (30th)
      day
      after such investment bank’s determination of such fair market value an amount
      equal to such fair market value (the “Repurchase
      Price”).
      The
      Repurchase Price shall be payable in cash by wire transfer of immediately
      available funds. The Company agrees that in the event of the Company’s purchase
      of this Warrant under this Section 18,
      the
      Holder’s damages would be uncertain and difficult to estimate because of the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder. Accordingly, any premium due under this Section 18
      is
      intended by the parties to be, and shall be deemed, a reasonable estimate of
      the
      Holder’s actual loss of its investment opportunity and not as a
      penalty.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    (d) Void
      Redemption. In the event that the Company does not pay the Repurchase Price
      in
      full within the time period set forth in Section 18(c),
      at any
      time thereafter and until the Company pays such unpaid Repurchase Price in
      full,
      the Holder shall have the option to, in lieu of repurchase, void its Notice
      of
      Repurchase at Option of Holder by sending written notice thereof to the Company
      via facsimile (the “Void
      Optional Repurchase Notice”).
      Upon
      the Company’s receipt of such Void Optional Repurchase Notice, the Notice of
      Repurchase at Option of Holder shall be null and void with respect to this
      Warrant.

     

    (e) Miscellaneous.
      A Holder’s delivery of a Void Optional Repurchase Notice and exercise of its
      rights following such notice shall not affect the Company’s obligations to make
      any payments which have accrued prior to the date of such notice. An
“Other
      Event”
shall
      be deemed to have occurred at such time as any of the following events
      occur:

     

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

     

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

     

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

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

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

     

    (v) the
      Company or any Subsidiary either (i) fails to pay, when due, or within any
      applicable grace period, any payment with respect to any Indebtedness (as
      defined in the Transaction Agreement) in excess of $150,000 due to any third
      party, other than, with respect to unsecured Indebtedness only, payments
      contested by the Company or such Subsidiary (as the case may be) in good faith
      by proper proceedings and with respect to which adequate reserves have been
      set
      aside for the payment thereof in accordance with GAAP, or otherwise be in breach
      or violation of any agreement for monies owed or owing in an amount in excess
      of
      $150,000, which breach or violation permits the other party thereto to declare
      a
      default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
      any other circumstance or event that would, with or without the passage of
      time
      or the giving of notice, result in a default or event of default under any
      agreement binding the Company or any Subsidiary, which default or event of
      default would or is likely to have a material adverse effect on the business,
      assets, operations (including results thereof), liabilities, properties,
      condition (including financial condition) or prospects of the Company or any
      of
      its Subsidiaries, individually or in the aggregate;
      or

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (vi) any
      Material Adverse Effect (as defined in the Transaction Agreement)
      occurs.

     

    19. MANDATORY
      CONVERSION.

     

    (a) Mandatory
      Conversion. If at any time from and after the fourth (4th)
      anniversary of the Issuance Date but prior to the Holder’s delivery of a Notice
      of Repurchase at Option of Holder (the “Mandatory
      Conversion Eligibility Date”),
      (i)
      the Common
      Shares trade at a price equal to or greater than $3.00 per share (the
“Trigger
      Price”)
      (as
      adjusted for stock splits, combinations and the like) for
      a
      period of fifteen (15) consecutive Trading Days following the Mandatory
      Conversion Eligibility Date (the “Mandatory
      Conversion Measuring Period”)
      and
      (B) the average daily trading volume on the Principal Market during such
      Mandatory Conversion Measuring Period exceeds 400,000 shares (a “Mandatory
      Conversion Liquidity Event”)
      and
      (ii) the Equity Conditions shall have been satisfied or waived in writing
      by the Holder on each day during the period commencing on the Mandatory
      Conversion Notice Date (as defined below) and ending on the Mandatory Conversion
      Date (as defined below), the Company shall have the right to require the Holder
      to convert up to all of then remaining Conversion Amount of this Warrant into
      fully paid, validly issued and nonassessable Common Shares in accordance with
      Section 1
      hereof
      at the Conversion Rate in effect as of the Mandatory Conversion Date (as defined
      below) (a “Mandatory
      Conversion”).
      The
      Company may exercise its right to require conversion under this Section
19(a)
      on one
      occasion by delivering, within not more than ten (10) days following
      the date of the satisfaction of both of the conditions set forth in clause
      (i)
      above, a
      written
      notice thereof by facsimile and overnight courier to the Holder (the
“Mandatory
      Conversion Notice”
and
      the
      date the Holder received such notice by facsimile is referred to as the
“Mandatory
      Conversion Notice Date”).
      The
      Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion
      Notice shall state (i) the Trading Day selected for the Mandatory Conversion
      in
      accordance with this Section 19(a),
      which
      Trading Day shall be at least twenty (20) Business Days but not more than sixty
      (60) Business Days following the Mandatory Conversion Notice Date (the
“Mandatory
      Conversion Date”),
      (ii)
      the portion of the Conversion Amount of this Warrant subject to the Mandatory
      Conversion, (iii) the aggregate Conversion Amounts of all the Transaction
      Agreement Warrants subject to the Mandatory Conversion pursuant to this Section
      19(a)
      and
      Section 19(b)
      below
      and (iv) the number of Common Shares to be issued to the Holder on the Mandatory
      Conversion Date.

    (b) Pro
      Rata
      Conversion Requirement. If the Company elects to cause a conversion of any
      portion of the Conversion Amount of this Warrant pursuant to Section
19(a),
      then it
      must simultaneously take the same action in the same proportion with respect
      to
      all Transaction Agreement Warrants. Any portion of the Conversion Amount of
      this
      Warrant converted by the Holder after the Mandatory Conversion Notice Date
      shall
      reduce the portion of the Conversion Amount required to be converted on the
      Mandatory Conversion Date. If the Company has elected a Mandatory Conversion,
      the mechanics of conversion set forth in Section 1(a)
      shall
      apply, to the extent applicable, as if the Company and the Transfer Agent had
      received from the Holder on the Mandatory Conversion Date a Conversion Notice
      with respect to the Conversion Amount being converted pursuant to the Mandatory
      Conversion.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    20. REDEMPTIONS
      OR REQUIRED PURCHASES BY HOLDERS OF OTHER TRANSACTION AGREEMENT
      WARRANTS.
      Upon
      the Company’s receipt of any notice from any of the holders of any of the other
      Transaction Agreement Warrants for redemption or required purchase or repurchase
      (as the case may be) as a result of any event or occurrence described in
      Sections 4(c),
      17
      or
18
      hereof
      (each, an “Other
      Redemption Notice”),
      the
      Company shall immediately, but no later than one (1) Business Day after its
      receipt thereof, forward to the Holder by facsimile a copy of such Other
      Redemption Notice(s) and make a prompt public announcement thereof. If the
      Company receives any redemption or required purchase or repurchase notice (as
      the case may be) from the Holder and one or more Other Redemption Notices under
      any of the other Transaction Agreement Warrants, during the seven (7) Business
      Day period beginning on and including the date which is three (3) Business
      Days
      prior to the Company’s receipt of such notice from the Holder and ending on and
      including the date which is three (3) Business Days after the Company’s receipt
      of such notice from the Holder and the Company is unable to redeem or purchase
      or repurchase (as the case may be) all amounts required to be redeemed or
      purchased or repurchased (as the case may be) by such notice from the Holder
      and
      such Other Redemption Notices so received during such seven (7) Business Day
      period, then the Company shall redeem or purchase or repurchase (as the case
      may
      be) a pro rata amount from each holder of the Transaction Agreement Warrants
      (including the Holder) based on the amounts submitted for redemption or purchase
      or repurchase (as the case may be) pursuant to such notice from the Holder
      and
      such Other Redemption Notices so received by the Company during such seven
      (7)
      Business Day period.

     

    [signature
      page follows]

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

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

    
      	 	 	 
	 	 
	 	 	WORKSTREAM INC.
	 
 	 
 	 
 
	 	 	By: 
	 	
              
Name: 
	 	Title:

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    EXHIBIT
      A

     

    CONVERSION
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO CONVERT THIS

    SPECIAL
      WARRANT

     

    WORKSTREAM
      INC.

    The
      undersigned holder hereby converts _________________ of the Conversion Amount
      into ________________ Common Shares (“Warrant
      Shares”)
      of
      Workstream Inc., a corporation existing pursuant to the Canada Business
      Corporations Act (the “Company”),
      evidenced by the Special Warrant (the “Warrant”)
      issued
      to the undersigned holder. Capitalized terms used herein and not otherwise
      defined shall have the respective meanings set forth in the
      Warrant.

     

    The
      Company shall deliver to holder, or its designee or agent as specified below,
      __________ Warrant Shares in accordance with the terms of the Warrant. Delivery
      shall be made to holder, or for its benefit, to the following
      address:

     

    _______________________

    _______________________

    _______________________

    _______________________

     

    The
      undersigned holder intends to immediately sell ___________ of the Warrant Shares
      pursuant to the registration statement covering the resale of such Warrant
      Shares and, to the extent applicable, in compliance with the prospectus delivery
      requirements of the Securities Act of 1933, as amended.

     

    Date:
      _______________ __, ______

     

     

    
      	       	 	 
	
              Name
                of Registered Holder

            	 	 

    

     

    
      	 	 	 	 
	By: 	 	 	 
	
              
                
Name:

            	 	 	
            
	
              Title:

            	 	 	 

    

     

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs
      ______________ to issue the above indicated number of Common Shares in
      accordance with the Transfer Agent Instructions dated _____________, 2007 from
      the Company and acknowledged and agreed to by _______________.

    
      	 	 	 
	 	 
	 	 	WORKSTREAM INC.
	 
 	 
 	 
 
	 	 	By: 
	 	
              
Name:
	 	Title:

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