Document:

Unassociated Document

    EXHIBIT
      10.1

     

    AMENDMENT
      TO asset
      purchase
      AGREEMENT

     

    This
      Amendment to Asset Purchase Agreement
      (this
“Amendment”) dated as of April 4, 2007, by and among Smith Micro
      Software, Inc., a Delaware corporation (“Purchaser”), IS Acquisition Sub, Inc.,
      a Delaware corporation and a wholly-owned subsidiary of Purchaser (“Acquisition
      Sub” and together with Purchaser the “Purchasing Parties”), Insignia Solutions
      plc, a company incorporated under the laws of England and Wales (company no.
      1961960) (“Seller”) and the subsidiaries of Seller as set forth on the signature
      page hereto (such subsidiaries and Seller collective referred to herein as
      the
“Selling Parties”), is entered into by and among the undersigned with reference
      to the following facts:

     

    WHEREAS,
      the
      Purchasing Parties and the Selling Parties are parties to that certain Asset
      Purchase Agreement dated as of February 11, 2007 (the “Agreement”);

     

    WHEREAS,
      pursuant to Section 13.4 of the Agreement the parties desire to enter into
      this
      Amendment in order to amend the Agreement as set forth herein.

     

    NOW,
      THEREFORE,
      the
      parties agree as follows.

     

    1.  Amendment
      of Section 1.3 of the Agreement.
      Section 1.3 of the Agreement is hereby amended and restated in its entirety
      as follows:

     

    “1.3 Assumed
      Liabilities.
      Subject
      to the terms and conditions of this Agreement, at the Closing, the Selling
      Parties shall assign, and the Purchasing Parties shall assume only the Assumed
      Liabilities. Thereafter, the Purchasing Parties shall pay and discharge all
      such
      Assumed Liabilities as and when such Assumed Liabilities become due and owing.
      For the purposes of this Agreement, the “Assumed
      Liabilities”
shall
      mean (i) the value of accrued vacation time that is credited to Employees who
      are hired by any of the Purchasing Parties at Closing and that is not paid
      by
      the Selling Parties, (ii) any other accrued employee liabilities agreed upon
      in
      writing by the Purchasing Parties, and (iii) obligations arising from and after
      the Closing pursuant to the Seller Contracts (for purposes of this Agreement,
      (i) and (ii) are collectively referred to herein as the “Employee
      Liabilities”).
      Notwithstanding the foregoing, the Purchasing Parties shall not, without the
      prior written consent of Purchaser, assume liability or payment obligations
      for
      any Taxes (other than employment-related Taxes, but excluding any interest,
      fines, penalties or additions thereon) or all or any portion of the Liability
      described in Section 1.4(p). If the Selling Parties shall be required to pay
      any
      amounts included in Assumed Liabilities, then the Purchasing Parties shall
      reimburse the Selling Parties thereofor, subject to potential offset for any
      amounts owing to the Purchasing Parties by the Selling Parties.”

     

    2.  Amendment
      of Section 2.1 of the Agreement.
      Section
      2.1 of the Agreement is hereby amended and restated in its entirety as
      follows:

     

    “2.1 Purchase
      Price
      As full
      consideration for the sale, assignment, transfer and delivery of the Purchased
      Assets by the Selling Parties to the Purchasing Parties, Purchaser shall deliver
      to Seller, acting on its own behalf and on behalf of the Selling Parties,
      aggregate consideration of Sixteen Million Dollars (US$16,000,000) plus the
      Post
      -Closing Payment (collectively the “Purchase
      Price”),
      payable in the following manner:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (a) Purchaser
      shall deliver to Seller for the account of the Selling Parties by wire transfer
      of immediately available funds, funds equal to Twelve Million Five Hundred
      Thousand Dollars (US$12,500,000);

     

    (b) Purchaser
      shall discharge and forgive the liabilities of Seller or its Subsidiaries to
      Purchaser pursuant to the Promissory Note initially delivered to Seller on
      December 22, 2006; 

     

    (c) One
      Million Five Hundred Thousand Dollars ($1,500,000) (the “Holdback
      Amount”)
      shall
      be payable by Purchaser subject to and in accordance with Section
      2.2;

     

    (d) Purchaser
      shall deliver to Seller for the account of the Selling Parties by wire transfer
      of immediately available funds, funds equal to the product of (a) Two Million
      Five Hundred Seventy-Five Thousand Dollars (US$2,575,000), minus (b) the dollar
      amount of the Employee Liabilities, within three (3) business days of the
      Employee Liabilities being defined (but in no event later than ten (10) business
      days after the Closing). The payment set forth in this Section 2.1(d) shall
      be
      referred to herein as the “Post-Closing
      Payment.”
      Notwithstanding the foregoing, Purchaser shall be entitled to withhold Five
      Hundred Thousand Dollars (US$500,000) of the Post-Closing Payment until the
      Selling Parties deliver to Purchaser Seller’s audited financial statements
      (including the opinion of Seller’s independent registered public accounting
      firm) as of and for the year ended December 31, 2006, at which time such amount
      shall be delivered to the Selling Parties.”

     

    3.  Amendment
      of Agreement to Add Insignia Asia Corporation as a
      Party.
      The
      Agreement is hereby amended to include Insignia Asia Corporation as a party
      to,
      and a Selling Party for all purposes under, the Agreement..

     

    4.  Amendment
      of Section 1.2 of the Agreement.
      Section
      1.2 of the Agreement is hereby amended to include the following Section
      1.2(g):

     

    “(g) All
      rights and obligations of Seller under the Stock Transfer Agreement dated March
      2007 by and among Insignia Solutions, Inc., Korean Digital Corporation and
      Jtek
      Corporation (the “Stock Transfer Agreement”).”

     

    5.  Amendment
      of Section 1.4 of the Agreement.
      Section
      1.4 of the Agreement is hereby amended to include the following Section
      1.4(r):

     

    “(r) Any
      Liability and obligation of Seller arising out of the Stock Transfer
      Agreement.”

     

    6.  Counterparts.
      This
      Amendment may be executed in counterparts with the same force and effect as
      if
      each of the signatories had executed the same instrument.

     

    7.  Definitions.
      Capitalized terms not otherwise defined herein shall have the respective
      meanings set forth in the Agreement.

     

    8.  Other.
      Except
      as provided herein, the Agreement shall continue in full force and effect in
      accordance with its terms.

     

    [Remainder
      of page intentionally left blank]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
 

    IN
      WITNESS WHEREOF,
      the
      parties have executed this Amendment as of the day and year first above
      written.

    

    
      	
              “Purchaser”

              SMITH
                MICRO SOFTWARE INC.

              By:/s/
                William W. Smith, Jr.

              Name:
                William W. Smith, Jr.

              Title:
                President and Chief Executive Officer

            	
              “Seller”

              INSIGNIA
                SOLUTIONS PLC

              By:
                /s/
                Mark McMillan

              Name:
                Mark McMillan

              Title:
                Chief
                Executive Officer

            
	
               

              IS
                ACQUISITION SUB, INC.

              By:
                /s/
                William W. Smith, Jr.

              Name:
                William W. Smith, Jr.

              Title:
                President and Chief Executive Officer

            	
              INSIGNIA
                SOLUTIONS INC

              By:
                /s/
                Mark McMillan

              Name:
                Mark McMillan

              Title:
                Chief
                Executive Officer

            
	 	 
	 	
              INSIGNIA
                SOLUTIONS AB

              By:
                /s/
                Mark McMillan

              Name:
                Mark McMillan

              Title:
                Chief
                Executive Officer

            
	 	 
	 	
              INSIGNIA
                ASIA CORPORATION

              By:
                /s/
                Mark McMillan

              Name:
                Mark McMillan

              Title:
                Chief
                Executive OfficerAMENDED
      AND RESTATED LOAN AND SECURITY AGREEMENT

    

    AMONG

    

    WORKSTREAM
      USA, INC.

    PAULA
      ALLEN HOLDINGS, INC.

    THE
      OMNI PARTNERS, INC.

    6FIGUREJOBS.COM,
      INC.,

    AS
      THE BORROWERS,

    

    WORKSTREAM
      INC.,

    AS
      A GUARANTOR

    

    AND

    

    HILCO
      FINANCIAL, LLC,

    AS
      THE LENDER

    

    DATED
      AS OF MARCH 30, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

    

    
      	 	 	 	 	
              Page

            
	
              Article
                I DEFINITIONS

            	 	
              1

            
	 	
              Section
                1.1

            	
              Definitions

            	 	
              1

            
	 	
              Section
                1.2

            	
              Other
                Definitional Terms; Rules of Interpretation

            	 	
              13

            
	 	
              Section
                1.3

            	
              Amendment
                and Restatement of Original Loan Agreement; Effect on Original Loan
                Agreement.

            	 	
              14

            
	 	
              Section
                1.4

            	
              Ratification,
                Confirmation and Reaffirmaation of Original Loan
                Documents.

            	 	
              14

            
	 	 	 	 
	
              Article
                II ADVANCES

            	 	
              15

            
	 	
              Section
                2.1

            	
              Commitment;
                Delivery of Revolving Loan Note

            	 	
              15

            
	 	
              Section
                2.2

            	
              Borrowing
                Mechanics.

            	 	
              15

            
	 	
              Section
                2.3

            	
              Mandatory
                Payment; Voluntary and Mandatory Reduction of Commitment.

            	 	
              17

            
	 	
              Section
                2.4

            	
              Interest;
                Default Interest Rate; Participations; Usury.

            	 	
              17

            
	 	
              Section
                2.5

            	
              Maintenance
                of Account.

            	 	
              19

            
	 	
              Section
                2.6

            	
              Fees.

            	 	
              20

            
	 	
              Section
                2.7

            	
              Time
                for Interest Payments; Payment on Non-Business Days; Computation
                of
                Interest and Fees; Place of Payment.

            	 	
              21

            
	 	
              Section
                2.8

            	
              Voluntary
                Prepayment

            	 	
              21

            
	 	
              Section
                2.9

            	
              Application
                of Payments

            	 	
              21

            
	 	
              Section
                2.10

            	
              Advances
                to Pay Obligations

            	 	
              21

            
	 	
              Section
                2.11

            	
              Use
                of Proceeds

            	 	
              22

            
	 	
              Section
                2.12

            	
              Liability
                Records

            	 	
              22

            
	 	
              Section
                2.13

            	
              Joint
                and Several Liability; Appointment of Borrower
                Representative.

            	 	
              22

            
	 	 	 
	
              Article
                III SECURITY INTEREST; OCCUPANCY; SETOFF

            	 	
              23

            
	 	
              Section
                3.1

            	
              Grant
                of Security Interest.

            	 	
              23

            
	 	
              Section
                3.2

            	
              Notification
                of Account Debtors and Other Obligors

            	 	
              23

            
	 	
              Section
                3.3

            	
              Assignment
                of Insurance

            	 	
              23

            
	 	
              Section
                3.5

            	
              License

            	 	
              24

            
	 	
              Section
                3.6

            	
              Financing
                Statements

            	 	
              24

            
	 	
              Section
                3.7

            	
              Setoff

            	 	
              25

            
	 	
              Section
                3.8

            	
              Collateral

            	 	
              25

            
	 	 	 	 	 
	
              Article
                IV CONDITIONS OF LENDING

            	 	
              25

            
	 	
              Section
                4.1

            	
              Conditions
                to Initial Advance.

            	 	
              25

            
	 	
              Section
                4.2

            	
              Conditions
                to Each Advance.

            	 	
              25

            

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

    
      	
              Article
                V REPRESENTATIONS AND WARRANTIES

            	 	
              26

            
	 	
              Section
                5.1

            	
              Existence
                and Power; Name; Chief Executive Office; Inventory and Equipment
                Locations; Federal Employer Identification Number and Organizational
                Identification Number

            	 	
              26

            
	 	
              Section
                5.2

            	
              Capitalization

            	 	
              26

            
	 	
              Section
                5.3

            	
              Authorization
                of Borrowing; No Conflict as to Law or Agreements

            	 	
              27

            
	 	
              Section
                5.4

            	
              Legal
                Agreements

            	 	
              27

            
	 	
              Section
                5.5

            	
              Subsidiaries

            	 	
              27

            
	 	
              Section
                5.6

            	
              Financial
                Condition; No Adverse Change

            	 	
              27

            
	 	
              Section
                5.7

            	
              Litigation

            	 	
              27

            
	 	
              Section
                5.8

            	
              Regulation U

            	 	
              28

            
	 	
              Section
                5.9

            	
              Taxes

            	 	
              28

            
	 	
              Section
                5.10

            	
              Title
                and Liens

            	 	
              28

            
	 	
              Section
                5.11

            	
              Intellectual
                Property Rights.

            	 	
              28

            
	 	
              Section
                5.12

            	
              Plans

            	 	
              30

            
	 	
              Section
                5.13

            	
              Default

            	 	
              30

            
	 	
              Section
                5.14

            	
              Environmental
                Matters.

            	 	
              30

            
	 	
              Section
                5.15

            	
              Intentionally
                Deleted

            	 	
              31

            
	 	
              Section
                5.16

            	
              Financing
                Statements

            	 	
              31

            
	 	
              Section
                5.17

            	
              Rights
                to Payment

            	 	
              31

            
	 	
              Section
                5.18

            	
              Financial
                Solvency

            	 	
              31

            
	 	
              Section
                5.19

            	
              Additional
                Representations and Warranties

            	 	
              32

            
	 	 	 
	
              Article
                VI COVENANTS

            	 	
              32

            
	 	
              Section
                6.1

            	
              Reporting
                Requirements

            	 	
              32

            
	 	
              Section
                6.2

            	
              Mimimum
                Availability 

            	 	
              36

            
	 	
              Section
                6.3

            	
              Permitted
                Liens; Financing Statements.

            	 	
              36

            
	 	
              Section
                6.4

            	
              Indebtedness

            	 	
              37

            
	 	
              Section
                6.5

            	
              Guaranties

            	 	
              38

            
	 	
              Section
                6.6

            	
              Investments
                and Subsidiaries

            	 	
              38

            
	 	
              Section
                6.7

            	
              Dividends
                and Distributions

            	 	
              38

            
	 	
              Section
                6.8

            	
              Salaries

            	 	
              39

            
	 	
              Section
                6.9

            	
              Restricted
                Payments

            	 	
              39

            
	 	
              Section
                6.10

            	
              Books
                and Records; Collateral Examination, Inspection and Appraisals; Deposit
                Account Agreements and Securities Account Agreements

            	 	
              39

            
	 	
              Section
                6.11

            	
              Account
                Verification

            	 	
              41

            
	 	
              Section
                6.12

            	
              Compliance
                with Laws.

            	 	
              41

            
	 	
              Section
                6.13

            	
              Payment
                of Taxes and Other Claims

            	 	
              42

            
	 	
              Section
                6.14

            	
              Maintenance
                of Properties.

            	 	
              42

            
	 	
              Section
                6.15

            	
              Insurance

            	 	
              42

            
	 	
              Section
                6.16

            	
              Preservation
                of Existence

            	 	
              43

            
	 	
              Section
                6.17

            	
              Delivery
                of Instruments, etc

            	 	
              43

            
	 	
              Section
                6.18

            	
              Sale
                or Transfer of Assets; Suspension of Business Operations

            	 	
              43

            
	 	
              Section
                6.19

            	
              Consolidation
                and Merger; Asset Acquisitions

            	 	
              43

            
	 	
              Section
                6.20

            	
              Sale
                and Leaseback

            	 	
              43

            
	 	
              Section
                6.21

            	
              Restrictions
                on Nature of Business

            	 	
              43

            
	 	
              Section
                6.22

            	
              Accounting

            	 	
              44

            
	 	
              Section
                6.23

            	
              Plans

            	 	
              44

            
	 	
              Section
                6.24

            	
              Place
                of Business; Name

            	 	
              44

            
	 	
              Section
                6.25

            	
              Amendments
                to Certain Documents

            	 	
              44

            
	 	
              Section
                6.26

            	
              Performance
                by the Lender

            	 	
              44

            

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
              Article
                VII EVENTS
                OF DEFAULT, RIGHTS AND REMEDIES

            	 	
              45

            
	 	
              Section
                7.1

            	
              Events
                of Default

            	 	
              45

            
	 	
              Section
                7.2

            	
              Rights
                and Remedies

            	 	
              47

            
	 	
              Section
                7.3

            	
              Certain
                Notices

            	 	
              48

            
	 	 	 
	
              Article
                VIII MISCELLANEOUS

            	 	
              48

            
	 	
              Section
                8.1

            	
              No
                Waiver; Cumulative Remedies; Compliance with Laws

            	 	
              48

            
	 	
              Section
                8.2

            	
              Amendments,
                etc

            	 	
              48

            
	 	
              Section
                8.3

            	
              Notices;
                Communication of Confidential Information; Requests for
                Accounting

            	 	
              48

            
	 	
              Section
                8.4

            	
              Further
                Documents

            	 	
              49

            
	 	
              Section
                8.5

            	
              Costs
                and Expenses

            	 	
              50

            
	 	
              Section
                8.6

            	
              Indemnity

            	 	
              50

            
	 	
              Section
                8.7

            	
              Participants

            	 	
              50

            
	 	
              Section
                8.8

            	
              Execution
                in Counterparts; Facsimile Execution

            	 	
              51

            
	 	
              Section
                8.9

            	
              Retention
                of Credit Parties’ Records

            	 	
              51

            
	 	
              Section
                8.10

            	
              Binding
                Effect; Assignment; Complete Agreement

            	 	
              51

            
	 	
              Section
                8.11

            	
              Severability
                of Provisions

            	 	
              51

            
	 	
              Section
                8.12

            	
              Headings

            	 	
              51

            
	 	
              Section
                8.13

            	
              Governing
                Law; Jurisdiction, Venue

            	 	
              51

            
	 	
              Section
                8.14

            	
              Waiver
                of Jury Trial

            	 	
              52

            
	 	 	 
	
              Article
                IX CROSS-GUARANTY

            	 	
              52

            
	 	
              Section
                9.1

            	
              Cross-Guaranty

            	 	
              52

            
	 	
              Section
                9.2

            	
              Waivers
                by Borrowers

            	 	
              53

            
	 	
              Section
                9.3

            	
              Benefit
                of Guaranty

            	 	
              53

            
	 	
              Section
                9.4

            	
              Waiver
                of Subrogation, Etc.

            	 	
              53

            
	 	
              Section
                9.5

            	
              Election
                of Remedies

            	 	
              54

            
	 	
              Section
                9.6

            	
              Limitation

            	 	
              54

            
	 	
              Section
                9.7

            	
              Contribution
                with Respect to Guaranty Obligations

            	 	
              54

            
	 	
              Section
                9.8

            	
              Liability
                Cumulative

            	 	
              55

            

    

    

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    Table
      of Exhibits and Schedules

    

    
      	
              Exhibit
                A

            	 	
              Form
                of Substitute and Amended Revolving Loan Note

            
	
              Exhibit
                B

            	 	
              Form
                of Notice of Borrowing

            
	
              Exhibit
                C

            	 	
              Schedule
                of Closing Documents

            
	
              Exhibit
                D

            	 	
              Form
                of Compliance Certificate

            
	 	 	 
	
              Schedule
                3.6 

            	 	
              Financing
                Statements

            
	
              Schedule
                5.1

            	 	
              Trade
                Names, Chief Executive Office, Principal Place of Business, and Locations
                of Collateral

            
	
              Schedule
                5.2

            	 	
              Capitalization
                and Organizational Chart

            
	
              Schedule
                5.5

            	 	
              Subsidiaries

            
	
              Schedule
                5.7

            	 	
              Litigation
                Matters

            
	
              Schedule
                5.11

            	 	
              Intellectual
                Property Disclosures

            
	
              Schedule
                5.14

            	 	
              Environmental
                Matters

            
	
              Schedule
                6.3

            	 	
              Permitted
                Liens

            
	
              Schedule
                6.4

            	 	
              Permitted
                Debt and Guaranties

            
	
              Schedule
                6.10

            	 	
              Deposit
                Accounts

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDED
      AND RESTATED LOAN AND SECURITY AGREEMENT

     

    Dated
      as
      of March 30, 2007

     

    THIS
      AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as amended, restated, amended
      and restated, supplemented or otherwise modified and in effect from time to
      time, this “Agreement”)
      is
      entered into by and among WORKSTREAM USA, INC., a Delaware corporation
      (“Workstream
      USA”),
      PAULA
      ALLEN HOLDINGS, INC., a Florida corporation (“Paula
      Allen Holdings”),
      THE
      OMNI PARTNERS, INC., a Florida corporation (“Omni
      Partners”),
      and
      6FIGUREJOBS.COM, INC., a Delaware corporation (“6FigureJobs.com”)
      (Workstream USA, Paula Allen Holdings, Omni Partners and 6FigureJobs.com are
      collectively referred to herein as the “Borrowers”
and
      individually as a “Borrower”),
      WORKSTREAM INC., a corporation existing pursuant to the Canada Business
      Corporations Act (“Workstream”),
      and
      HILCO FINANCIAL, LLC, a Delaware limited liability company (the “Lender”).

     

    WITNESSETH:

    

    WHEREAS,
      each Borrower, Workstream and the Lender are parties to that certain Loan and
      Security Agreement dated as of September 28, 2006 (such Loan and Security
      Agreement being hereinafter referred to as the “Original
      Loan Agreement”);
      and

     

    WHEREAS,
      each Borrower, Workstream and the Lender have agreed to enter into this
      Agreement in order to, among other things, (a) amend and restate the Original
      Loan Agreement in its entirety; (b) re-evidence, ratify, confirm and reaffirm
      the “Original Obligations” (as such term is defined in Section
      1.3);
      and
      (c) set forth the terms and conditions under which the Lender will from time
      to
      time hereafter make further loans and other extensions of credit to or for
      the
      account of the Borrowers;

     

    NOW,
      THEREFORE, in consideration of the foregoing, and for other good and valuable
      consideration, the receipt, sufficiency and adequacy of which hereby are
      acknowledged, the parties hereto hereby agree as follows:

     

    Article
      I

     

    DEFINITIONS

     

    Section
      1.1 Definitions.
      For all
      purposes of this Agreement, except as otherwise expressly provided, the
      following terms shall have the meanings assigned to them in this Section or
      in
      the Section referenced after such term:

     

    “Accounts”
means
      all accounts, as such term is defined in the UCC, the PPSA and all “Claims” for
      the purpose of the Civil Code of Quebec (or similar Applicable Law), including
      each and every right to the payment of money, whether such right to payment
      now
      exists or hereafter arises, whether such right to payment arises out of a sale,
      lease or other disposition of goods or other property, out of a rendering of
      services, out of a loan, out of the overpayment of taxes or other liabilities,
      or otherwise arises under any contract or agreement, whether such right to
      payment is created, generated or earned by any Credit Party or by some other
      Person who subsequently transfers such Person’s interest to any Credit Party,
      whether such right to payment is or is not already earned by performance, and
      howsoever such right to payment may be evidenced, together with all other rights
      and interests (including all Liens) which any Credit Party may at any time
      have
      by law or agreement against any account debtor or other obligor obligated to
      make any such payment or against any property of such account debtor or other
      obligor; all including but not limited to all present and future accounts,
      contract rights, loans and obligations receivable, chattel papers, bonds, notes
      and other debt instruments, tax refunds and rights to payment in the nature
      of
      general intangibles.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “Advance”
and
      “Advances”
have
      the respective meanings set forth in Section
      2.1(a).

     

    “Affiliate”
or
      “Affiliates”
means,
      with respect to a Person, (a) any family member, officer, director, employee
      or
      managing agent of such Person, and (b) any other Person (i) that, directly
      or
      indirectly, through one or more intermediaries, controls, or is controlled
      by,
      or is under common control with, such given Person, (ii) that, directly or
      indirectly beneficially owns or holds 10% or more of any class of voting stock
      or partnership or other interest of such Person or any subsidiary of such
      Person, or (iii) 10% or more of the voting stock or partnership or other
      interest of which is directly or indirectly beneficially owned or held by such
      Person or a subsidiary of such Person. The term “control” means the possession,
      directly or indirectly, of the power to direct or cause the direction of the
      management and policies of a Person, whether through ownership of voting
      securities or partnership or other interests, by contract or
      otherwise.

     

    “Amendment
      Closing Fee”
has
      the
      meaning set forth in Section 2.6(f). 

     

    “Amendment
      Closing Date”
means
      March 30, 2007.

     

    “Amendment
      Effective Date”
means
      January 1, 2007.

     

    “Applicable
      Margin”
means
      three and one-half percent (3.50%).

     

    “Borrower
      Representative”
has
      the
      meaning set forth in Section
      2.13(b).

     

    “Borrowers’
      Account”
has
      the
      meaning set forth in Section
      2.5(b).

    

    “Borrowing
      Base”
      means:

    

    (a) Subject
      to clause
      (b)
      below,
      at any time, the amount equal at such time to:

    

    (i) eighty-five
      percent (85%) of the aggregate face amount of Qualified Accounts of the
      Borrowers, plus

    

    (ii) the
      Designated Sublimit; minus

    

    (iii) the
      amount of any reserves established by the Lender pursuant to clause
      (b)
      below.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    (b) The
      Lender at any time in the exercise of its commercially reasonable credit
      judgment shall be entitled to (i) establish and increase or decrease reserves
      against Qualified Accounts, (ii) reduce the advances rate under clause
      (a)(i)
      above or
      (following any such reduction) restore such advance rates to any level equal
      to
      or below the advance rates stated in clause
      (a)(i)
      above,
      (iii) impose additional restrictions (or eliminate the same) to the standards
      of
      eligibility set forth in the definition of “Qualified Accounts” and (iv)
      establish and increase or decrease a reserve in the amount of interest payable
      by Borrowers hereunder, including interest on Advances.

    

    “Borrowing
      Base Certificate”
has
      the
      meaning set forth in Section
      6.1(q).

    

    “Business
      Day”
means
      any day which is neither a Saturday or Sunday nor a legal holiday on which
      commercial banks are authorized or required to be closed in Chicago,
      Illinois.

    

    “Canadian
      Dollars”
and
      “C$” means dollars in currency of Canada.

    

    “Capital
      Expenditures”
means
      for a period, any expenditure of money during such period for the lease,
      purchase or other acquisition of any capital asset, or for the lease of any
      other asset which constitutes a capitalized lease under GAAP, whether payable
      currently or in the future.

     

    “Change
      of Control”
means
      a
      Change of Control Transaction as defined in the Warrant.

     

    “Collateral”
means
      all of each Credit Party’s Accounts, chattel paper and electronic chattel paper,
      Deposit Accounts, documents, Equipment, General Intangibles, goods, instruments,
      Inventory, Investment Property, letter-of-credit rights, letters of credit,
      all
      sums on deposit in any Deposit Account, and any items in any Lockbox; together
      with (a) all substitutions and replacements for and products of any of the
      foregoing; (b) in the case of all goods, all accessions; (c) all
      accessories, attachments, parts, equipment and repairs now or hereafter attached
      or affixed to or used in connection with any goods; (d) all warehouse
      receipts, bills of lading and other documents of title now or hereafter covering
      such goods; (e) all collateral subject to the Lien of any Security
      Document; (f) any money, or other assets of each Credit Party that now or
      hereafter come into the possession, custody, or control of the Lender;
      (g) proceeds of any and all of the foregoing; (h) books and records of each
      Credit Party, including all mail or electronic mail addressed to such Credit
      Party; and (i) all of the foregoing, whether now owned or existing or hereafter
      acquired or arising or in which any Credit Party now has or hereafter acquires
      any rights.

     

    “Collateral
      Management Fee”
has
      the
      meaning set forth in Section
      2.6(d).
      

     

    “Commitment”
means
      the Lender’s commitment to make Advances on the terms and subject to the
      conditions set forth herein in an aggregate outstanding principal amount not
      to
      exceed at any time $15,000,000.

    

    “Constituent
      Documents”
means
      with respect to any Person, as applicable, such Person’s certificate of
      incorporation, articles of incorporation, by-laws, certificate of formation,
      articles of organization, limited liability company agreement, management
      agreement, operating agreement, shareholder agreement, partnership agreement
      or
      similar document or agreement governing such Person’s existence, organization or
      management or concerning disposition of ownership interests of such Person
      or
      voting rights among such Person’s owners.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Credit
      Party”
means
      each Borrower, the Borrower Representative, each Guarantor, any other Person
      directly or indirectly liable for all or any part of the Obligations, or any
      Person which has pledged any collateral for all or any part of the Obligations,
      and “Credit Parties” means all such Persons collectively.

     

    “Debt”
      means of
      a Person as of a given date, all items of indebtedness or liability which in
      accordance with GAAP would be included in determining total liabilities as
      shown
      on the liabilities side of a balance sheet for such Person and shall also
      include the aggregate payments required to be made by such Person at any time
      under any lease that is considered a capitalized lease under GAAP.

     

    “Default”
means
      an event that, with giving of notice or passage of time or both, would
      constitute an Event of Default.

     

    “Default
      Period”
means
      any period of time beginning on the day an Event of Default occurs and ending
      on
      the date such Event of Default has been cured or waived in writing by the
      Lender.

     

    “Default
      Rate”
means
      an annual interest rate in effect during a Default Period or following the
      Termination Date, which interest rate shall be equal to two percent (2%) over
      the applicable rate otherwise in effect, as such rate may change from time
      to
      time.

     

    “Deposit
      Account Agreement”
means
      each agreement (other than a Lockbox Agreement), in form and substance
      reasonably satisfactory to the Lender, among a bank or other depository
      institution, the applicable Credit Party and the Lender delivered to the Lender
      pursuant to Section
      6.10
      hereof,
      including in each case such provisions to provide dominion and control over
      such
      accounts to the Lender such that upon notice by the Lender to such institution
      of the occurrence of an Event of Default hereunder all actions under such
      account shall be taken solely at the Lender’s direction.

     

    “Deposit
      Accounts”
means
      all of each Credit Party’s demand, time, savings, passbook, money market or
      other depository accounts, and all certificates of deposit, maintained by such
      Credit Party with any bank, savings and loan association, credit union or other
      depository institution, including, without limitation, all Lockbox
      Accounts.

     

    “Designated
      Sublimit”
means
      an amount equal to $5,000,000; provided,
      that
      the Designated Sublimit shall be automatically and permanently
      reduced:

     

    (a) by
      an
      amount equal to $83,333.33, on May 1, 2007 and the first day of each consecutive
      calendar month ending thereafter; and

     

    (b) on
      each
      date on which any Credit Party receives proceeds as consideration from the
      sale,
      lease, transfer or other disposition of any asset (other than any such
      disposition of assets that is permitted under Section
      6.18(c)),
      net of
      (a) commissions and other reasonable and customary transaction costs, fees
      and
      expenses properly attributable to such transaction and payable by such Credit
      Party in connection therewith (in each case, paid to non-Affiliates), (b)
      transfer taxes, (c) amounts payable to holders of senior Liens on such asset
      (to
      the extent such Liens constitute Permitted Liens hereunder), if any, and (d)
      an
      appropriate reserve for income taxes in accordance with GAAP in connection
      therewith (and for purposes of the foregoing, all proceeds of insurance coverage
      paid or other recoveries or awards of compensation for any such fixed asset,
      or
      group of fixed assets, taken by condemnation or eminent domain shall be deemed
      proceeds of the disposition of that fixed asset).

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Director”
means
      a
      director of the applicable Credit Party.

     

    “Dollars”
and
“$”
      means dollars in currency of the United States of America.

     

    “Environmental
      Law”
means
      any federal, state, local or other governmental statute, regulation, law or
      ordinance dealing with the protection of human health and the
      environment.

     

    “Equipment”
means
      all equipment, as such term is defined in the UCC, the PPSA (or similar
      applicable law), whether now owned or hereafter acquired, including but not
      limited to all present and future machinery, vehicles, furniture, fixtures,
      manufacturing equipment, shop equipment, office and recordkeeping equipment,
      parts, tools, supplies, and including specifically the goods described in any
      equipment schedule or list herewith or hereafter furnished to the Lender by
      any
      Credit Party.

     

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended from time to
      time.

     

    “ERISA
      Affiliate”
means
      any trade or business (whether or not incorporated) that is a member of a group
      which includes any Credit Party and which is treated as a single employer under
      Section 414 of the IRC.

     

    “Event
      of Default”
has
      the
      meaning set forth in Section
      7.1.

     

    “Financial
      Covenants”
means
      the covenants set forth in Section
      6.2.

     

    “Fundamental
      Change”
has
      the
      meaning set forth in the Warrant.

     

    “GAAP”
means
      generally accepted accounting principles, applied on a basis consistent with
      the
      accounting practices applied in the financial statements described in
Section
      5.6.

     

    “General
      Intangibles”
means
      all general intangibles, as such term is defined in the UCC, the PPSA (or
      similar applicable law), whether now owned or hereafter acquired, including
      all
      present and future Intellectual Property Rights, customer or supplier lists
      and
      contracts, manuals, operating instructions, permits, franchises, the right
      to
      use any name, and the goodwill of each Credit Party’s business.

     

    “Guarantor(s)”
means
      Workstream and any other Person now or hereafter guarantying the
      Obligations. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    “Guarantor
      Payment”
has
      the
      meaning set forth in Section
      9.7(a).

     

    “Hazardous
      Substances”
means
      pollutants, contaminants, hazardous substances, hazardous wastes, petroleum
      and
      fractions thereof, and all other chemicals, wastes, substances and materials
      listed in, regulated by or identified in any Environmental Law.

     

    “Indebtedness”
has
      the
      meaning set forth in the Transaction Agreement.

     

    “Indemnified
      Liabilities”
has
      the
      meaning set forth in Section
      8.6.

     

    “Indemnitees”
has
      the
      meaning set forth in Section
      8.6.

     

    “Infringement”
or
      “Infringing”
when
      used with respect to Intellectual Property Rights means any infringement or
      other violation of Intellectual Property Rights.

     

    “Intellectual
      Property Rights”
means
      all (i) foreign and domestic patents, patent applications, patent disclosures
      and inventions, (ii) Internet domain names, trademarks, service marks, trade
      dress, trade names, logos and corporate names (both foreign and domestic) and
      registrations and applications for registration thereof together with all of
      the
      goodwill associated therewith, (iii) copyrights (registered or unregistered)
      and
      copyrightable works and registrations and applications for registration thereof,
      (iv) computer software, data, data bases and documentation thereof, (v) trade
      secrets and other confidential information (including ideas, formulas,
      compositions, (whether patentable or unpatentable and whether or not reduced
      to
      practice), know-how, manufacturing and production processes and techniques,
      research and development information, drawings, specifications, designs, plans,
      proposals, technical data, copyrightable works, financial and marketing plans
      and customer and supplier lists and information), (vi) other material
      intellectual property rights and (vii) copies and tangible embodiments
      thereof.

     

    “Inventory”
means
      all inventory, as such term is defined in the UCC, the PPSA (or similar
      applicable law), whether now owned or hereafter acquired, whether consisting
      of
      whole goods, spare or maintenance parts or components, supplies or materials,
      whether acquired, held or furnished for sale, for lease or under service
      contracts or for manufacture or processing, and wherever located.

     

    “Investment
      Property”
means
      all investment property, as such term is defined in the UCC, the PPSA (or
      similar applicable law), whether now owned or hereafter acquired, including
      but
      not limited to all securities, security entitlements, securities accounts,
      commodity contracts, commodity accounts, stocks, bonds, mutual fund shares,
      money market shares and U.S. Government securities.

     

    “IRC”
means
      the Internal Revenue Code of 1986, as amended from time to time.

     

    “Lender’s
      Account”
means
      the following:

    

    
      	
              Bank:

            	LaSalle Bank National Association
              135
                South LaSalle Street

              Chicago,
                Illinois 60603

              Tel.
                No.: (312) 904-2000

            	 
	 	 	 
	
              ABA#:

            	071-000-505	 
	
              Account
                No.: 

            	5800442419	 
	
              Account
                Name: 

            	Hilco Financial, LLC	 
	
              Reference: 

            	Workstream	 

    

      

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Lien”
means
      any security interest, mortgage, deed of trust, pledge, lien, charge,
      encumbrance, title retention agreement or analogous instrument or device,
      including the interest of each lessor under any capitalized lease and the
      interest of any bondsman under any payment or performance bond, in, of or on
      any
      assets or properties of a Person, whether now owned or hereafter acquired and
      whether arising by agreement or operation of law.

     

    “Loan
      Documents”
means
      this Agreement, each Revolving Loan Note, the Security Documents, the
      Transaction Agreement, the Warrant Documents and any other agreement, document,
      instrument or certificate executed and/or delivered in connection with this
      Agreement or the transactions contemplated hereby.

     

    “Lockbox
      Account”
has
      the
      meaning set forth in Section
      6.10.

     

    “Lockbox
      Account Agreement”
has
      the
      meaning set forth in Section
      6.10.

     

    “Lockbox
      Bank”
has
      the
      meaning set forth in Section
      6.10.

     

    “Material
      Adverse Effect”
means
      any of the following:

     

    (a) A
      material adverse effect on the business, operations, results of operations,
      prospects, assets, liabilities or condition (financial or otherwise) of any
      Credit Party;

     

    (b) A
      material adverse effect on the ability of any Credit Party to perform its
      obligations under the Loan Documents;

     

    (c) A
      material adverse effect on the ability of the Lender to enforce the Obligations
      or to realize the intended benefits of the Security Documents, including a
      material adverse effect on the validity or enforceability of any Loan Document
      or of any rights against any Guarantor, or on the status, existence, perfection,
      priority (subject to Permitted Liens) or enforceability of any Lien securing
      payment or performance of the Obligations; or

     

    (d) Any
      claim
      against any Credit Party or any threat of litigation which if determined
      adversely to such Credit Party would cause such Credit Party to be liable to
      pay
      an amount exceeding $500,000 or would be an event described in clauses (a),
      (b) and (c) above.

     

    “Multiemployer
      Plan”
means
      a
      multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which any
      Credit Party or any ERISA Affiliate contributes or is obligated to
      contribute.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Notice
      of Borrowing”
has
      the
      meaning set forth in Section
      2.2(a).

     

    “Obligations”
means
      each Advance and each and every other debt, liability and obligation of every
      type and description which any Credit Party may now or at any time hereafter
      owe
      to the Lender (including all interest and fees contemplated by this Agreement
      and the other Loan Documents, and including any amounts owing under the Warrant
      and the Registration Rights Agreement), whether such debt, liability or
      obligation now exists or is hereafter created or incurred, whether it arises
      in
      a transaction involving the Lender alone or in a transaction involving other
      creditors of such Credit Party, and whether it is direct or indirect, due or
      to
      become due, absolute or contingent, primary or secondary, liquidated or
      unliquidated, or sole, joint, several or joint and several, and including all
      Debt of each Credit Party arising under any Loan Document between such Credit
      Party and the Lender, whether now in effect or hereafter entered
      into.

     

    “Officer”
means
      an officer of the applicable Credit Party.

     

    “Overadvance”
has
      the
      meaning set forth in Section
      2.3(a).

     

    “Owner”
means
      with respect to any Credit Party, each Person having legal or beneficial title
      to an ownership interest in such Credit Party or a right to acquire such an
      interest (excluding the Lender with respect to its rights under any Warrant
      Documents or any Pledge Agreement).

     

    “Parent
      Pledge Agreement”
means
      the Pledge Agreement of even date herewith executed by Workstream in favor
      of
      the Lender, pledging all of the capital stock of Workstream USA held by
      it.

     

    “Patent,
      Trademark and Copyright Security Agreement”
means
      the Patent, Trademark and Copyright Security Agreement dated as of the Agreement
      Date made by Workstream and the Borrowers in favor of the Lender.

     

    “Pension
      Plan”
means
      a
      pension plan (as defined in Section 3(2) of ERISA) maintained for employees
      of
      any Credit Party or any ERISA Affiliate and covered by Title IV of
      ERISA.

     

    “Permitted
      Lien”
and
      “Permitted
      Liens”
have
      the meanings set forth in Section
      6.3(a).

     

    “Person”
means
      any individual, corporation, partnership, joint venture, limited liability
      company, association, joint-stock company, trust, unincorporated organization
      or
      government or any agency or political subdivision thereof.

     

    “Plan”
means
      an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for
      employees of any Credit Party or any ERISA Affiliate.

     

    “Pledge
      Agreements”
means
      the Parent Pledge Agreement, the Workstream USA Pledge Agreement and
      any
      other pledge agreement entered into after the Agreement Date by any Credit
      Party.

     

    “PPSA”
means
      the Personal Property Security Act as the same may, from time to time, be in
      effect in the Province of Ontario; provided, that in the event that, by reason
      of mandatory provisions of law, any or all of the attachment, perfection or
      priority of the Lender's security interest in any Collateral is governed by
      the
      Personal Property Security Act as in effect in a jurisdiction other than the
      Province of Ontario, the term “PPSA” shall mean the Personal Property Security
      Act or a similar act or statute as in effect in such other jurisdiction for
      purposes of the provisions of this Agreement relating to such attachment,
      perfection or priority and for purposes of definition related to such
      provisions.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Premises”
means
      all locations where each Credit Party conducts its business or has any rights
      of
      possession, including but not limited to the addresses listed on Schedule
      5.1
      attached
      hereto.

     

    “Prepayment
      Premium”
has
      the
      meaning set forth in Section
      2.6(e).
      

     

    “Prime
      Rate”
means,
      at any time, the rate of interest which is identified and normally published
      by
      Bloomberg Professional Service Page Prime as the “Prime Rate” (or, if more than
      one rate is published as the Prime Rate, then the highest of such rates). Any
      change in Prime Rate will become effective as of the date the rate of interest
      which is so identified as the “Prime Rate” is different from that published on
      the preceding Business Day. If Bloomberg Professional Service no longer reports
      the Prime Rate, or if such Page Prime no longer exists, or the Lender determines
      in good faith that the rate so reported no longer accurately reflects an
      accurate determination of the prevailing Prime Rate, the Lender may select
      a
      reasonably comparable index or source to use as the basis for the Prime Rate.
      The “Prime Rate” may not be the lowest or best rate at which the Lender
      calculates interest or extends credit.

     

    “Qualified
      Accounts”
means
      Accounts of a Borrower arising in the ordinary course of such Borrower’s
      business, payable in Dollars or Canadian Dollars and deemed by the Lender in
      its
      commercially reasonable judgment to be eligible for inclusion in the calculation
      of the Borrowing Base. Unless otherwise approved in writing by the Lender,
      the
      following Accounts shall not be deemed Qualified Accounts:

     

    
      
        (i)
          Accounts
          for which the rendition of services has not been
          completed;

      

    

     

    (ii) Accounts
      for which the rendition of professional services have been provided but are
      yet
      unbilled in excess of $500,000;

     

    (iii) Accounts
      which have been disputed; the account debtor has asserted a setoff, defense
      or
      counterclaim with respect to the applicable Account (provided, that in the
      case
      of any dispute, setoff, defense or counterclaim with respect to any Account,
      only that portion of the Account subject to such dispute, setoff, defense or
      counterclaim shall be deemed ineligible by reason of this clause
      (iii));

     

    (iv) Accounts
      that are not lawfully owned by a Borrower free and clear of any Lien, other
      than
      Permitted Liens (provided that the Lien in favor of the Lender shall be a first
      priority Lien), or are not otherwise in compliance with all representations
      and
      warranties made by Borrowers with respect thereto in the Loan
      Documents;

     

    (v) Accounts
      that are not unconditionally payable within 90 days from the invoice
      date;

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (vi) Accounts
      that are evidenced by a judgment or a promissory note, chattel paper or any
      other instrument or other document that is not in the possession of the Lender
      or does not contain all necessary endorsements in favor of the
      Lender;

     

    (vii) Accounts
      that remain unpaid more than 60 days past the invoice due date; 

     

    (viii) Accounts
      due from an Affiliate or an employee, officer, director, creditor or supplier
      of
      any Credit Party;

     

    (ix) Accounts
      constituting an obligation of the United States of America or any other
      Governmental Authority (unless all steps required by the Lender in connection
      therewith, including notice to the Government of the United States of America
      under the Federal Assignment of Claims Act or any action under any state statute
      comparable to the Federal Assignment of Claims Act, have been duly taken in
      a
      manner reasonably satisfactory to the Lender);

     

    (x) Accounts
      due from an account debtor (or an applicable office of such account debtor)
      not
      located in a state of the United States of America or in Canada which are not
      supported by a letter of credit or other similar credit satisfactory to the
      Lender; provided, however, that Accounts due from account debtors located in
      Canada shall not at any time constitute more than 10% of all Qualified Accounts
      at such time;

     

    (xi) Accounts
      owing from an account debtor for which more than 50% of the aggregate amount
      of
      all Accounts owing to the Borrowers from such account debtor remain unpaid
      more
      than 90 days past the invoice date;

     

    (xii) Accounts
      from an account debtor that (A) has filed a petition for bankruptcy or any
      other
      relief under the Bankruptcy Code or any other law relating to bankruptcy,
      insolvency, reorganization or relief of debtors, made an assignment for the
      benefit of creditors, had filed against it any petition or other application
      for
      relief under the Bankruptcy Code or any such other law, (B) has failed,
      suspended business operations, become insolvent or called a meeting of its
      creditors for the purpose of obtaining any financial concession or
      accommodation, or (C) has had or suffered to be appointed a receiver or a
      trustee for all or a significant portion of its assets or affairs;

     

    (xiii) Accounts
      owing from an account debtor to the extent such Accounts exceed 20% of the
      aggregate Qualified Accounts of Borrowers (provided, that only that portion
      of
      the Accounts of any account debtor which exceeds the applicable percentage
      rate
      of the aggregate Qualified Accounts of Borrowers set forth above with respect
      to
      such account debtor shall be so deemed ineligible shall be deemed ineligible
      by
      reason of this clause (xiii));

     

    (xiv) Accounts
      with respect to which the Lender has notified Borrowers in writing that the
      Lender is not reasonably satisfied with the credit standing of the account
      debtor in relation to the aggregate amount of credit extended to such account
      debtor by Borrowers or for which the Lender believes, in its sole discretion
      (which discretion shall not be exercised in an arbitrary or capricious manner),
      that the prospect of collection thereof is impaired in any material respect
      for
      any reason;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (xv) Accounts
      in respect of which the Lender does not have a perfected first priority Lien;
      and

    

    (xvi)
       Accounts
      owing from an account debtor located in a state in which such Borrower is deemed
      to be doing business under the laws of such state and which denies creditors
      access to its courts in the absence of qualification to transact business in
      such state or of the filing of any reports with such state, unless such Borrower
      has qualified as a foreign entity authorized to transact business in such state
      or has filed all required reports.

    

    “Qualified
      Account Amount”
means,
      at any time, the net amount of Qualified Accounts at such time. As used herein,
      the phrase "net amount of Qualified Accounts" shall mean the face amount of
      such
      Accounts at any time less any and all returns, rebates, discounts (which may,
      at
      the Lender's option, be calculated on shortest terms), credits or allowances
      at
      any time issued, owing, claimed by account debtors or granted in connection
      with, or any interest accrued on the amount of, such Accounts at such
      time.

     

    “Qualified
      Cash”
means,
      at any time, the aggregate amount of unrestricted cash in each Deposit Account
      that is (i) maintained by a Credit Party with a depositary institution in the
      United States of America or Canada at such time and (ii) subject to a Deposit
      Account Agreement (or, in the case of a Deposit Account maintained by a Credit
      Party with a depositary institution in Canada, at the Lender’s option, an
      alternative arrangement satisfactory to the Lender which, in the Lender’s
      judgment, provides equivalent benefits to the Lender under applicable Canadian
      law as the Lender would have as a secured party by virtue of a Deposit Account
      Agreement under U.S. law) at such time; provided, however, that not more than
      $1,000,000 of cash maintained by the Credit Parties with depositary institutions
      in Canada shall be included as Qualified Cash at any one time.

     

    “Reportable
      Event”
means
      a
      reportable event (as defined in Section 4043 of ERISA), other than an event
      for
      which the 30-day notice requirement under ERISA has been waived in regulations
      issued by the Pension Benefit Guaranty Corporation.

     

    “Restricted
      Payment”
means
      (i) any redemption or prepayment or other retirement, prior to the stated
      maturity thereof or prior to the due date of any regularly scheduled installment
      or amortization payment with respect thereto, of any Debt (other than the
      Obligations), and (ii) any payment on or with respect to any Subordinated Debt
      other than in accordance with the terms of the applicable Subordination
      Agreement, if any.

     

    “Restructuring
      Fee”
has
      the
      meaning set forth in Section
      2.6(a).
      

     

    “Revolving
      Loan Note”
means
      the Borrowers’ revolving loan promissory note, payable to the order of the
      Lender in substantially the form of Exhibit
      A
      hereto,
      as same may be renewed and amended from time to time, and all replacements
      thereof and substitutions therefor.

     

    “Securities
      Account Agreement”
means
      each agreement, in form and substance satisfactory to the Lender, among a
      securities intermediary, the applicable Credit Party and the Lender delivered
      to
      the Lender pursuant to Section 6.10 hereof, including in each case such
      provisions to provide dominion and control over such accounts to the Lender
      such
      that upon notice by the Lender to such securities intermediary of the occurrence
      of an Event of Default hereunder all actions under such account shall be taken
      solely at the Lender’s direction.

     

    
      
        
        

      

      
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    “Securities
      Accounts”
means
      all of each Credit Party’s securities accounts, as such term is defined in the
      UCC.

     

    “Security
      Documents”
means
      this Agreement, the guaranty of any Guarantor, a security agreement of each
      Guarantor, in each case in form and substance satisfactory to the Lender, the
      Patent, Trademark and Copyright Security Agreement, the Pledge
      Agreements and
      any
      other document delivered to the Lender from time to time to secure the
      Obligations.

     

    “Security
      Interest”
has
      the
      meaning set forth in Section
      3.1.

     

    “Software”
has
      the
      meaning set forth in Section
      5.11(a).

     

    “Subordinated
      Debt”
means
      Debt which is subordinated to the Obligations pursuant to a Subordination
      Agreement or which is subordinated to the Obligations pursuant to the
      agreements, documents and instruments evidencing such Debt (which subordination
      provisions must be acceptable to the Lender in its discretion).

     

    “Subordination
      Agreement”
means
      any subordination agreement in favor of the Lender which is accepted in writing
      by the Lender from time to time and which subordinates any Debt of a Credit
      Party to the Obligations.

     

    “Subsidiary”
means,
      with respect to any Person, (a) any corporation of which an aggregate of
      more than 50% of the outstanding capital stock having ordinary voting power
      to
      elect a majority of the board of directors of such corporation (irrespective
      of
      whether, at the time, capital stock of any other class or classes of such
      corporation shall have or might have voting power by reason of the happening
      of
      any contingency) is at the time, directly or indirectly, owned legally or
      beneficially by such Person and/or one or more Subsidiaries of such Person,
      or
      with respect to which any such Person has the right (directly or indirectly)
      to
      vote or designate the vote of 50% or more of such capital stock whether by
      proxy, agreement, operation of law or otherwise, and (b) any partnership or
      limited liability company in which such Person and/or one or more Subsidiaries
      of such Person shall have a direct or indirect interest (whether in the form
      of
      voting or participation in profits or capital contribution) of more than 50%
      or
      of which any such Person is a general partner or may exercise the powers of
      a
      general partner. Unless the context otherwise requires, each reference to a
      Subsidiary shall be a reference to a Subsidiary of Workstream.

     

    “Termination
      Date”
means
      the earlier to occur of (a) February 1, 2008 (or such later date as may be
      established hereafter pursuant to Section
      2.1(c)
      hereof),
      or (b) the termination or reduction to zero ($0) of the Commitment in accordance
      with the terms of this Agreement. 

     

    “Termination
      Date Extension Fee”
has
      the
      meaning set froth in Section
      2.(g).

     

    “Termination
      Date Extension Request”
has
      the
      meaning set forth in Section
      2.1(c).
      

     

    
      
        
        

      

      
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    “Transaction
      Agreement”
means
      that certain Transaction Agreement between Workstream and the Lender, dated
      as
      of August 28, 2006.

     

    “Triggering
      Event”
has
      the
      meaning set forth in the Transaction Agreement.

     

    “UCC”
means
      the Uniform Commercial Code as in effect in the State of Illinois, or in any
      other state whose laws are held to govern this Agreement or any portion
      hereof.

     

    “Unused
      Line Fee”
has
      the
      meaning set forth in Section
      2.6(b).
      

     

    “Warrant
      Documents”
means
      each warrant (including the Warrant), registration rights agreement and each
      related document between Workstream and the Lender with respect to any warrant
      or any other right of the Lender to obtain, register, have registered, sell
      or
      otherwise dispose of any equity interest of Workstream, and such other documents
      contemplated by the Transaction Agreement related thereto.

     

    “Warrant”
has
      the
      meaning set forth in the Transaction Agreement.

     

    “Workstream
      USA Pledge Agreement”
means
      the Pledge Agreement of even date herewith executed by Workstream USA in favor
      of the Lender, pledging all of the capital stock of Paula Allen Holdings, Omni
      Partners and 6FigureJobs.com held by it.

     

    Section
      1.2 Other
      Definitional Terms; Rules of Interpretation.
      The
      words “hereof”, “herein” and “hereunder” and words of similar import when used
      in this Agreement shall refer to this Agreement as a whole and not to any
      particular provision of this Agreement. All accounting terms not otherwise
      defined herein have the meanings assigned to them in accordance with GAAP.
      All
      terms defined in the UCC or the PPSA and not otherwise defined herein have
      the
      meanings assigned to them in the UCC or the PPSA, as the context may require.
      References to Articles, Sections, subsections, Exhibits, Schedules and the
      like,
      are to Articles, Sections and subsections of, or Exhibits or Schedules attached
      to, this Agreement unless otherwise expressly provided. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
      limitation”. Unless the context in which used herein otherwise clearly requires,
“or” has the inclusive meaning represented by the phrase “and/or”. Defined terms
      include in the singular number the plural and in the plural number the singular.
      Reference to any agreement (including the Loan Documents), document or
      instrument means such agreement, document or instrument as amended or modified
      and in effect from time to time in accordance with the terms thereof (and,
      if
      applicable, in accordance with the terms hereof and the other Loan Documents),
      except where otherwise explicitly provided, and reference to any promissory
      note
      includes any promissory note which is an extension or renewal thereof or a
      substitute or replacement therefor. Reference to any law, rule, regulation,
      order, decree, requirement, policy, guideline, directive or interpretation
      means
      such law, rule, regulation, order, decree, requirement, policy, guideline,
      directive or interpretation as amended, modified, codified, replaced or
      reenacted, in whole or in part, and in effect on the determination date,
      including rules and regulations promulgated thereunder. Except as otherwise
      expressly provided herein, reference to any United States law, rule or
      regulation shall also mean and include any analogous Canadian law, rule or
      regulation, as the context may require. Reference to time of day, unless
      otherwise specifically provided, means local time in Chicago,
      Illinois

     

    
      
        
        

      

      
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    Section
      1.3 Amendment
      and Restatement of Original Loan Agreement; Effect on Original Loan
      Agreement. Subject
      to the terms and conditions set forth in this Agreement, effective as of the
      date hereof, the Original Loan Agreement is hereby amended and restated in
      its
      entirety without any novation thereof. Accordingly, this Agreement shall
      supersede and replace the Original Loan Agreement in its entirety, provided,
      however,
      that it
      is expressly understood and agreed by each of the parties hereto that (i) the
      “Obligations” (as such term is defined in this Agreement) mean and include all
“Obligations” (as such term is defined in the Original Loan Agreement)
      outstanding or otherwise existing on and as of the date hereof, before giving
      effect to the amendments provided for herein (such Obligations being herein
      referred to as the “Original
      Obligations”);
      (ii)
      the Original Obligations shall be payable hereafter in accordance with the
      respective terms and provisions hereof; and (iii) this Agreement and any
      Revolving Loan Notes issued under this Agreement (1) re-evidence, ratify and
      confirm the Original Obligations, (2) in the case of any such Revolving Loan
      Notes, are given in substitution and replacement for and not in repayment of
      any
“Notes” (as such term is defined the Original Loan Agreement) issued under the
      Original Loan Agreement, and (3) are in no way intended and shall not be deemed
      or construed to constitute a novation of the Original Loan Agreement or any
      Notes issued thereunder. Upon execution and delivery by the Borrower of this
      Agreement and the Revolving Loan Note contemplated hereunder, the Lender shall
      mark the existing note issued pursuant to the Original Loan Agreement
“cancelled” and return it to the Borrower. 

     

    Section
      1.4 Ratification,
      Confirmation and Reaffirmation of Original Loan Documents.
      Each
      Credit Party signatory hereto, in the respective capacities, if any, of such
      Credit Party under
      the
      Original Loan Agreement and each of the other “Loan Documents” (as such term is
      defined in the Original Loan Agreement, and herein referred to as the
“Original
      Loan Documents”)
      to
      which such Credit Party is a party (including the respective capacities of
      accommodation party, assignor, grantor, guarantor, indemnitor, mortgagor,
      obligor and pledgor, as applicable, and each other similar capacity, if any,
      in
      which such Credit Party granted Liens on all or any part of its properties
      and
      assets, or otherwise acted as an accommodation party, guarantor, indemnitor
      or
      surety with respect to all or any part of the Original Obligations), hereby
      (i)
      agrees that, except as otherwise expressly set forth herein, the terms and
      provisions hereof shall not affect in any way any payment, performance,
      observance or other obligations or liabilities of such Credit Party hereunder
      or
      under any of the other Original Loan Documents (other than the Original Loan
      Agreement), all of which obligations and liabilities are hereby ratified,
      confirmed and reaffirmed in all respects, and (ii) to the extent such Credit
      Party has granted Liens on any of its properties or assets pursuant to any
      of
      the Original Credit Documents to secure the payment, performance and/or
      observance of all or any part of the Original Obligations, acknowledges,
      ratifies, confirms and reaffirms such grant of Liens, and acknowledges and
      agrees that all of such Liens are intended and shall be deemed and construed
      to
      secure to the fullest extent set forth therein all now existing and hereafter
      arising Obligations under and as defined in this Agreement, as hereafter
      amended, restated, amended and restated, supplemented and otherwise modified
      and
      in effect from time to time.

     

    
      
        
        

      

      
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    Article
      II

     

    ADVANCES

     

    Section
      2.1 Commitment;
      Delivery of Revolving Loan Note. 

    

    (a) On
      the
      Amendment Closing Date, immediately before giving effect to the repayment and
      conversion of portions of the aggregate outstanding principal balance of the
      Term Advance (as such term is defined in the Original Loan Agreement) described
      below in clauses
      (A)
      and
(B)
      of this
Section
      2.1,
      the
      aggregate outstanding principal balance of the Term Advance is $15,000,000.
      Subject to the terms and conditions set forth in this Agreement, (i) on the
      Amendment Closing Date, (A) Borrowers shall prepay a portion of the aggregate
      then outstanding principal balance of the Term Advance in an amount equal to
      $10,000,000, and (B) the remaining portion of the aggregate then outstanding
      principal balance of the Term Advance in the amount of $5,000,000 for all
      purposes hereof and of each of the other Loan Documents shall be automatically
      converted and maintained outstanding hereunder as an Advance (as such term
      is
      defined hereunder); and (ii) on and after the Amendment Closing Date and to
      but
      excluding the Termination Date, the Lender agrees to make from time to time
      further loans and advances to Borrowers hereunder on a joint and several basis
      (each such loan and advance, including the outstanding principal balance of
      the
      Term Advance converted and maintained outstanding hereunder pursuant to
clause
      (i)(B)
      of this
Section
      2.1(a),
      being
      hereinafter referred to individually as an “Advance”
and
      collectively as the “Advances”);
      provided,
      that,
      (i) on the Amendment Closing Date, no Advance shall be made if, after giving
      effect to the making of such Advance and the simultaneous application of the
      proceeds thereof, the aggregate outstanding principal balance of the Advances
      would exceed the lesser at such time of (i) the Commitment and (ii) the
      Borrowing Base. Subject to the terms and conditions set forth in this Agreement,
      the Borrowers may from time to time borrow, repay and re-borrow
      Advances.

     

    (b) Borrowers
      hereby agree to execute and deliver to Lender on the Amendment Closing Date
      a
      Revolving Loan Note to evidence the Advances.

     

    (c) Borrowers
      may, upon the written request of the Borrowers (a “Termination
      Date Extension Request”)
      delivered to the Lender not more than one-hundred twenty (120) Business Days
      or
      less than ninety (90) Business Days prior to the initial Termination Date,
      request the Lender to extend such Termination Date for an additional one-year
      period expiring on the anniversary of the then scheduled Termination Date (or,
      if such date is not a Business Day, on the next preceding Business Day) on
      such
      terms as shall be mutually satisfactory to the Lender and each of the Borrowers,
      including, in any event the payment to the Lender of the Termination Date
      Extension Fee. If no Default or Event of Default has occurred and is continuing
      on the then scheduled Termination Date, the Termination Date shall be so
      extended.

     

    Section
      2.2 Borrowing
      Mechanics. 

     

    (a) Borrower
      Representative shall give the Lender prior telephonic notice (immediately
      confirmed in writing, in substantially the form of Exhibit
      B
      hereto
      (each a “Notice
      of Borrowing”),
      not
      later than 10:00 a.m. (Chicago time) on the date of borrowing of an Advance;
      provided,
      that,
      notwithstanding anything to the contrary set forth herein, except as otherwise
      previously agreed to by the Lender, Borrower Representative shall not submit
      a
      Notice of Borrowing and the Lender shall not be required to make any Advance
      more than once in any week. Each Notice of Borrowing shall be irrevocable and
      shall specify (i) the principal amount of the proposed Advance, and (ii) the
      proposed borrowing date, which must be a Business Day.

     

    
      
        
        

      

      
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    (b) Borrower
      Representative shall notify the Lender in writing of the names of the Officers
      of Borrower Representative authorized to request Advances on behalf of Borrowers
      and specifying which of those Officers are also, or, if none are, the Officers
      that are, authorized to direct the disbursement of Advances in a manner contrary
      to standing disbursement instructions, and shall provide the Lender with a
      specimen signature of each such Officer. In the absence of a specification
      of
      those Officers who are authorized to vary standing disbursement instructions,
      the Lender may assume that each Officer authorized to request Advances also
      has
      such authority. The Lender shall be entitled to rely conclusively on the
      authority of such Officers of the Borrower Representative to request Advances
      on
      behalf of Borrowers, or to vary standing disbursement instructions, until the
      Lender receives written notice to the contrary. The Lender shall have no duty
      to
      verify the authenticity of the signature appearing on any Notice of Borrowing
      or
      other writing delivered pursuant to this Section
      2.2
      and,
      with respect to an oral or electronic mail request for Advances, the Lender
      shall have no duty to verify the identity of any individual representing himself
      as one of the officers of Borrower Representative authorized to make such
      request on behalf of Borrowers. The Lender shall not incur any liability to
      any
      Credit Party as a result of (i) acting upon any telephonic or electronic mail
      notice referred to in this Section
      2.2
      if the
      Lender believes in good faith such notice to have been given by a duly
      authorized Officer of Borrower Representative or other individual authorized
      to
      request Advances on behalf of Borrowers or to direct the disbursement thereof
      in
      a manner contrary to standing disbursement instructions, or (ii) otherwise
      acting in good faith under this Section
      2.2
      and an
      advance made and disbursed pursuant to and in accordance with any such
      telephonic or electronic mail notice shall be deemed to be a Advance for all
      purposes of this Agreement.

     

    (c) In
      addition to being evidenced by the Revolving Loan Note and, as provided in
      Section
      2.5(b),
      by
      Borrowers’ Account, the Advances and Borrowers’ joint and several obligations to
      repay the Advances with interest in accordance with the terms of this Agreement
      shall be evidenced by this Agreement and the records of the Lender. The records
      of the Lender shall be prima
      facie
      evidence
      of the Advances and accrued interest thereon and of all payments made in respect
      thereof.

     

    (d) Notwithstanding
      the obligation of Borrower Representative to send written confirmation of a
      Notice of Borrowing made by telephone or electronic mail transmission if and
      when requested by the Lender, in the event that the Lender agrees to accept
      a
      Notice of Borrowing made by telephone or electronic mail transmission, such
      Notice of Borrowing shall be binding on Borrowers whether or not written
      confirmation is sent by Borrower Representative or requested by the Lender.
      The
      Lender may act prior to the receipt of any requested written confirmation,
      without any liability whatsoever, based upon telephonic or electronic mail
      notice believed by the Lender in good faith to be from Borrower Representative,
      any Borrower or any of their respective agents. The Lender’s records of the
      terms of any telephonic or electronic mail transmission Notices of Borrowing
      shall be conclusive on Borrowers in the absence of gross negligence or willful
      misconduct on the part of the Lender in connection therewith.

     

    
      
        
        

      

      
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    Section
      2.3 Mandatory
      Payment; Voluntary and Mandatory Reduction of Commitment. 

     

    (a) The
      amount by which the aggregate outstanding principal balance of the Advances
      exceeds at any time the lesser at such time of (i) the Commitment and (ii)
      the
      Borrowing Base (any such amount being herein referred to as an “Overadvance”),
      shall
      be immediately due and payable without the necessity of any notice or demand;
      provided, that, so long as an Event of Default shall not then have occurred
      and
      be continuing, Borrowers shall not be required to make any such repayment in
      respect of an Overadvance Amount for thirty (30) days following the date on
      which such Overadvance first occurred, to the extent that such Overadvance
      arose
      solely as a result of changes made by the Lender pursuant to clause
      (b)
      of the
      definition of the term “Borrowing Base”. Repayments of such excess amounts shall
      be applied to the Advances in accordance with Section
      2.5(a).

     

    (b) On
      the
      Termination Date, the Commitment shall automatically reduce to zero ($0) and
      may
      not be reinstated and all Obligations shall them be due and payable in full.
      Subject to concurrent payment of the Prepayment Premium, Borrowers may reduce
      the Commitment at any time in whole (but Borrowers may not reduce the Commitment
      in part at any time).

     

    Section
      2.4 Interest;
      Default Interest Rate; Participations; Usury.

     

    (a) Interest
      Rate.
      All
      outstanding Advances shall bear interest on the unpaid principal amount thereof
      (including, to the extent permitted by law, on interest thereon not paid when
      due) from the date made until paid in full in cash at a rate determined by
      reference to the Prime Rate plus the Applicable Margin. Each change in the
      Prime
      Rate shall be reflected in the interest rate applicable to Advances as of the
      effective date of such change. All interest charges and fees (including the
      Unused Line Fee) hereunder shall be computed on the basis of a year of 360
      days
      and actual days elapsed (which results in more interest and fees being paid
      than
      if computed on the basis of a 365-day year).

     

    (b) Default
      Interest Rate.
      At any
      time during any Default Period or following the Termination Date, in the
      Lender’s sole discretion and without waiving any of its other rights or
      remedies, the principal of the Advances shall bear interest at the Default
      Rate
      or such lesser rate as the Lender may determine, effective as of the first
      day
      on which any Default Period begins through the last day of such Default Period,
      or any shorter time period that the Lender may determine. The decision of the
      Lender to impose a rate that is less than the Default Rate or to not impose
      the
      Default Rate for the entire duration of the Default Period shall be made by
      the
      Lender in its sole discretion and shall not be a waiver of any of its other
      rights and remedies, including its right to retroactively impose the full
      Default Rate for the entirety of any such Default Period or following the
      Termination Date.

     

    
      
        
        

      

      
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    (c) Participations.
      If any
      Person shall acquire a participation in the Advances, the Borrowers shall be
      obligated to the Lender to pay the full amount of all interest calculated under
      this Section
      2.4,
      along
      with all other fees, charges and other amounts due under this Agreement,
      regardless if such Person elects to accept interest with respect to its
      participation at a lower rate than that calculated under this Section
      2.4,
      or
      otherwise elects to accept less than its pro rata share of such fees, charges
      and other amounts due under this Agreement.

     

    (d) Usury.
      In any
      event no rate change shall be put into effect which would result in a rate
      greater than the highest rate permitted by law. Notwithstanding anything to
      the
      contrary contained in any Loan Document, all agreements which either now are
      or
      which shall become agreements between the Borrowers and the Lender are hereby
      limited so that in no contingency or event whatsoever shall the total liability
      for payments in the nature of interest, additional interest and other charges
      exceed the applicable limits imposed by any applicable usury laws. This
      provision shall never be superseded or waived and shall control every other
      provision of the Loan Documents and all agreements between the Borrowers and
      the
      Lender, or their successors and assigns.
      It is
      the intention of the parties that in no event shall the amounts paid by the
      Borrowers and/or the Guarantors, or payable to or received by the Lender under
      the Loan Documents or any related documents, including without limitation any
      amounts that would be characterized as "interest" under applicable law
      (including, without limitation, any applicable Canadian law), exceed amounts
      permitted under any such applicable law. Accordingly, if any obligation to
      pay,
      payment made to the Lender, or collection by the Lender pursuant the Loan
      Documents (or in connection therewith) is finally judicially determined to
      be
      contrary to any such applicable law, such obligation to pay, payment or
      collection shall be deemed to have been made by mutual mistake of the Lender,
      the Borrowers and the Guarantors and such amount shall be deemed to have been
      adjusted with retroactive effect to the maximum amount or rate of interest,
      as
      the case may be, as would not be so prohibited by the applicable law. Such
      adjustment shall be effected, to the extent necessary, by reducing or refunding
      (as required by applicable law and, to the extent not so required, at the option
      of the Lender) the amount of interest or any other amounts which would
      constitute unlawful amounts required to be paid or actually paid to the Lender
      under the Loan Documents and any such other agreement related thereto or by
      treating any such excess interest paid to be a payment of principal hereunder.
      For greater certainty, to the extent that any interest, charges, fees, expenses
      or other amounts required to be paid to or received by the Lender under the
      Loan
      Documents or related thereto are held to be within the meaning of "interest"
      or
      another applicable term to otherwise be violative of applicable law, such
      amounts shall be pro-rated over (A) the period of time to which they relate
      or
      (B) otherwise over the period from the initial advance date to the applicable
      Termination Date (or repayment date as applicable).

     

    (e) Increased
      Capital Costs.
      If any
      change in, or the introduction, adoption, effectiveness, interpretation,
      reinterpretation or phase-in of, any law or regulation, directive, guideline,
      decision or request (whether or not having the force of law) of any court,
      central bank, regulator or other governmental authority affects or would affect
      the amount of capital required or expected to be maintained by the Lender,
      or
      any Person controlling the Lender, and the Lender determines (in its sole and
      absolute discretion) that the rate of return on its or such controlling Person’s
      capital as a consequence of its commitments or the Advances made by the Lender
      is reduced to a level below that which the Lender or such controlling Person
      could have achieved but for the occurrence of any such circumstance, then,
      in
      any such case upon notice from time to time by the Lender to the Borrowers,
      the
      Borrowers shall immediately pay directly to the Lender additional amounts
      sufficient to compensate the Lender or such controlling Person for such
      reduction in rate of return. A statement of the Lender as to any such additional
      amount or amounts (including calculations thereof in reasonable detail) shall,
      in the absence of manifest error, be conclusive and binding on the Borrowers.
      In
      determining such amount, the Lender may use any method of averaging and
      attribution that it (in its sole and absolute discretion) shall deem
      applicable.

     

    
      
        
        

      

      
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    (f) Taxes.
      All
      payments by the Borrowers of principal of, and interest on, the Advances and
      all
      other amounts payable hereunder shall be made free and clear of and without
      deduction for any present or future income, excise, stamp or franchise taxes
      and
      other taxes, fees, duties, withholdings or other charges of any nature
      whatsoever imposed by any taxing authority, but excluding franchise taxes and
      taxes imposed on or measured by the Lender’s net income or receipts (such
      non-excluded items being called “Taxes”).
      In
      the event that any withholding or deduction from any payment to be made by
      the
      Borrower hereunder is required in respect of any Taxes pursuant to any
      applicable law, rule or regulation, then the Borrowers will:

     

    (i) pay
      directly to the relevant authority the full amount required to be so withheld
      or
      deducted, including, without limitation, as a result of any payment under clause
      (iii) below;

     

    (ii) promptly
      forward to the Lender an official receipt or other documentation satisfactory
      to
      the Lender evidencing such payment to such authority; and

     

    (iii) pay
      to
      the Lender such additional amount or amounts as is necessary to ensure that
      the
      net amount actually received by the Lender will equal the full amount the Lender
      would have received had no such withholding or deduction been
      required.

     

    Moreover,
      if any Taxes are directly asserted against the Lender with respect to any
      payment received by the Lender hereunder, the Lender may pay such Taxes and
      the
      Borrowers will promptly pay such additional amount (including any penalties,
      interest or expenses) as is necessary in order that the net amount received
      by
      the Lender after the payment of such Taxes (including any Taxes on such
      additional amount) shall equal the amount the Lender would have received had
      not
      such Taxes been asserted. If the Borrowers fail to pay any Taxes when due to
      the
      appropriate taxing authority or fails to remit to the Lender the required
      receipts or other required documentary evidence, the Borrowers shall indemnify
      the Lender for any incremental Taxes, interest or penalties that may become
      payable by the Lender as a result of any such failure.

     

    Section
      2.5 Maintenance
      of Account. 

     

    (a) All
      amounts received by Lender hereunder shall be applied, first,
      to the
      payment of any fees and expenses due and payable to the Lender under any of
      the
      Loan Documents; second,
      to the
      payment of interest due on the Advances; third,
      to the
      payment of principal due on the Advances; and, fourth,
      to the
      payment of other Obligations not specifically referred to in this Section
      2.5(a)
      due and
      payable to the Lender under the Loan Documents.

     

    
      
        
        

      

      
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    (b) The
      Lender shall maintain an account (“Borrowers’
      Account”)
      on its
      books in the name of Borrowers in which Borrowers will be charged with all
      loans
      and advances made by the Lender to Borrowers or for any Borrower’s account,
      including the Advances, any fees and expenses payable hereunder and any other
      Obligations. Borrowers will be credited, in accordance with Section
      2.5(a)
      above,
      with all amounts received by the Lender from Borrowers or from others for any
      Borrower’s account. In no event shall prior recourse to any Collateral be a
      prerequisite to the Lender’s right to demand payment of any Obligation upon its
      maturity.

     

    (c) After
      the
      end of each month, the Lender shall send Borrowers a statement accounting for
      the charges, loans, advances, repayments and other transactions occurring among
      and between the Lender and Borrowers during that month. The monthly statements
      shall, absent manifest error, be an account stated, which, unless an error
      is
      reported by Borrowers to Lender in writing within 30 days after Borrower’s
      receipt of such statement, shall be final, conclusive and binding on
      Borrowers.

     

    Section
      2.6 Fees.

     

    (a) Restructuring
      Fee.
      Borrowers shall pay to the Lender a restructuring fee in the amount of $750,000
      (the “Restructuring
      Fee”).
      The
      Restructuring Fee shall be fully earned as of the Amendment Effective Date
      and
      non-refundable for any reason. A portion of the Restructuring Fee in the amount
      of $200,000 shall be due and payable by Borrowers to the Lender on the Amendment
      Closing Date and the remaining balance thereof in the amount of $550,000 shall
      be due and payable by Borrowers to the Lender not later than December 20,
      2007.

     

    (b) Unused
      Line Fee.
      Borrowers shall pay to the Lender a non-refundable fee (the “Unused
      Line Fee”)
      equal
      to one-quarter of one percent (0.25%) per annum of the unused portion of the
      Commitment. The Unused Line Fee shall accrue daily from the Amendment Closing
      Date until the Termination Date, and shall be due and payable monthly in
      arrears, on the first Business Day of each month and on the Termination
      Date.

     

    (c) Collateral
      Exam Expenses.
      Borrowers shall pay the Lender all actual out-of-pocket costs and expenses
      incurred by Lender or any collateral examiner engaged by the Lenders in
      conducting any collateral examination or inspection of the Collateral or the
      Borrowers’ operations or businesses.

     

    (d) Prepayment
      Premium.
      If the
      Commitment is terminated for any reason prior to February 1, 2008, concurrently
      with such termination, shall pay to the Lender a prepayment premium in the
      amount of $187,500 (the “Prepayment
      Premium”).

     

    (e) Collateral
      Management Fee.
      Borrowers shall pay to the Lender a monthly collateral management fee (the
      “Collateral
      Management Fee”)
      equal
      to $2,500. The Collateral Management Fee shall be earned beginning on the
      Amendment Effective Date and shall be due and payable monthly in arrears, on
      the
      Amendment Closing Date and on the first Business Day of each month
      thereafter.

     

    
      
        
        

      

      
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    (f) Termination
      Date Extension Fee.
      Borrower shall pay to Lender on the effective date of any extension of the
      Termination Date, if any, pursuant to Section
      2.1(c),
      a
      non-refundable fee (the “Termination
      Date Extension Fee”)
      in an
      amount equal to five percent (5%) of the Commitment in effect after giving
      effect to such extension.

     

    (g) Amendment
      Closing Fee.
      Borrowers shall pay to the Lender an amendment closing fee in the amount of
      $34,583.34 (the “Amendment
      Closing Fee”)
      which
      fee includes interest and Collateral Management Fees accruing since the
      Amendment Effective Date. The Amendment Closing Fee shall be fully earned as
      of
      the Amendment Closing Date and non-refundable for any reason and shall be due
      and payable in full by Borrowers to the Lender on the Amendment Closing
      Date.

     

    Section
      2.7 Time
      for Interest Payments; Payment on Non-Business Days; Computation of Interest
      and
      Fees; Place of Payment.

     

    (a) Time
      For Interest Payments.
      Accrued
      and unpaid interest on the Advances shall be due and payable on the first day
      of
      each month and on the Termination Date. Additionally, all accrued but unpaid
      interest on the Advances shall be due and payable contemporaneously with any
      prepayment thereof (whether voluntary or mandatory). Interest will accrue from
      the most recent date to which interest has been paid or, if no interest has
      been
      paid, from the date of advance to the date such payment is due.

     

    (b) Payment
      on Non-Business Days.
      Whenever any payment to be made hereunder shall be stated to be due on a day
      which is not a Business Day, such payment may be made on the next succeeding
      Business Day, and such extension of time shall in such case be included in
      the
      computation of interest on the Advances or the fees hereunder, as the case
      may
      be.

     

    (c) Place
      of Payments.
      All
      payments by Credit Parties of the Obligations shall be without deduction,
      defense, setoff or counterclaim and shall be made in same day funds and
      delivered to the Lender in Chicago, Illinois by wire transfer to such account
      as
      the Lender shall from time to time designate to the Credit Parties in
      writing.

     

    Section
      2.8 Voluntary
      Prepayment.
      Except
      as otherwise provided herein, the Borrowers may prepay the Advances in whole
      at
      any time or from time to time in part.

     

    Section
      2.9 Application
      of Payments.
      Any
      payment received by the Lender shall be applied to the Obligations (a) so long
      as an Event of Default shall not have occurred and be continuing, in accordance
      with Section
      2.5(a),
      and
      (ii) upon the occurrence and during the continuance of an Event of Default,
      in
      such order and in such amounts as the Lender in its sole discretion may
      determine from time to time.

     

    Section
      2.10 Advances
      to Pay Obligations.
      While
      the Lender has no obligation to do so, the Lender may, in its discretion at
      any
      time or from time to time during a Default Period, without any Borrower’s
      request, make an Advance in an amount equal to the portion of the Obligations
      from time to time due and payable. Any such Advance shall constitute an
      Obligation hereunder, shall be secured by all of the Collateral, shall bear
      interest at the Default Rate and shall be payable by the Borrowers (together
      with all accrued interest thereon) on the earlier of (a) the Lender’s demand
      therefor and (b) the Termination Date.

     

    
      
        
        

      

      
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    Section
      2.11 Use
      of
      Proceeds.
      The
      Borrowers shall use the proceeds of the Advances only for ordinary working
      capital purposes.

     

    Section
      2.12 Liability
      Records.
      Upon
      the Lender’s demand, the Borrowers will admit and certify in writing the exact
      principal balance of the Obligations that the Borrowers then assert to be
      outstanding.

     

    Section
      2.13 Joint
      and Several Liability; Appointment of Borrower Representative.

     

    (a)
      Each
      Borrower acknowledges that it is jointly and severally liable for all of the
      Obligations under the Loan Documents. Each Borrower expressly understands,
      agrees and acknowledges that (i) the Borrowers are all affiliated entities
      and
      part of a mutual and collective business enterprise, (ii) each Borrower desires
      to have the availability of one common credit facility instead of separate
      credit facilities, (iii) each Borrower has requested that the Lender extend
      such
      a common credit facility on the terms herein provided, (iv) the Lender will
      be
      lending against, and relying on a security interest in, all of the Borrowers’
assets even though the proceeds of any particular Advance made hereunder may
      not
      be advanced directly to a particular Borrower, (v) each Borrower will
      nonetheless benefit by the making of all such Advances by the Lender and the
      availability of a single credit facility of a size greater than each could
      independently warrant, and (vi) all of the representations, warranties,
      covenants, obligations, conditions, agreements and other terms contained in
      the
      Loan Documents shall be applicable to and shall be binding upon each
      Borrower.

     

    (b)
      Each
      of
      the Borrowers hereby irrevocably designates and authorizes Workstream to act
      as
      its representative and agent generally for purposes of this Agreement and the
      other Loan Documents (Workstream, in such capacity, including its successors
      and
      assigns, is referred to herein as the “Borrower
      Representative”).
      Each
      Borrower agrees (i) that Borrower Representative may exercise any right, or
      perform any obligation, specified by this Agreement on such Borrower’s behalf,
      (ii) that all documents and instruments executed by the Borrower Representative
      on such Borrower’s behalf will jointly and severally bind such Borrower, and
      (iii) to be bound by any communication or request delivered by the Borrower
      Representative to the Lender or its agents. Each Borrower grants to Borrower
      Representative a power of attorney to act on its behalf as provided herein,
      including, without limitation, with respect to executing documents and
      instruments, requesting Advances hereunder, and providing notices, reports,
      certificates and statements to, and receiving the same from, the Lender
      hereunder and under the other Loan Documents. This appointment as
      attorney-in-fact is durable and irrevocable as long as any Obligations are
      outstanding and this Agreement has not been terminated, and will not be affected
      by any disability or incapacity of any Borrower’s employees, agents or
      representatives, or the lapse of time. The Lender shall be entitled to rely
      on
      any such communication or request delivered by the Borrower
      Representative.

     

    
      
        
        

      

      
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    Article
      III

     

    SECURITY
      INTEREST; OCCUPANCY; SETOFF

     

    Section
      3.1 Grant
      of Security Interest. 

     

    (a) Each
      Borrower hereby pledges, assigns and grants to the Lender a lien on and security
      interest in the Collateral (collectively referred to as the “Security
      Interest”)
      as
      security for the payment and performance of the Obligations. Upon request by
      the
      Lender, each Borrower will grant the Lender a security interest in all
      commercial tort claims it may have against any Person.

     

    (b) Without
      limiting the generality of the foregoing, as additional security for the payment
      and performance of the Obligations, each Borrower hereby grants to the
      Lender a continuing security interest in and Lien upon, and hereby collaterally
      assigns to the Lender, all of such Borrower's right, title and interest in
      and
      to each Deposit Account and in and to any deposits or other sums at any time
      credited to each such Deposit Account. In connection with the foregoing,
      each Borrower hereby authorizes and directs each bank or other depository which
      maintains any Deposit Account to pay or deliver to the Lender upon the Lender’s
      written demand therefor made at any time and without further notice to such
      Borrower (such notice being hereby expressly waived), all balances in each
      Deposit Account with such depository for application to the Obligations then
      outstanding, and the rights given to the Lender in this Section shall be
      cumulative with and in addition to the Lender’s other rights and remedies in
      regard to the amounts on deposit in any Deposit Account as proceeds of
      Collateral. Each Borrower hereby irrevocably appoints the Lender as such
      Borrower’s attorney-in-fact to collect any and all such balances to the extent
      any such payment is not made to the Lender by such bank or other depository
      after demand thereon is made by the Lender pursuant hereto.

     

    Section
      3.2 Notification
      of Account Debtors and Other Obligors.
      The
      Lender may at any time during a Default Period notify any account debtor or
      other Person obligated to pay the amount due that such right to payment has
      been
      assigned or transferred to the Lender for security and, subject to applicable
      law, shall be paid directly to the Lender. Each Borrower will join in giving
      such notice if the Lender so requests. At any time after any Borrower or the
      Lender gives such notice to an account debtor or other obligor, the Lender
      may,
      but need not, subject to applicable law, in the Lender’s name or in such
      Borrower’s name, (a) demand, sue for, collect or receive any money or
      property at any time payable or receivable on account of, or securing, any
      such
      right to payment, or grant any extension to, make any compromise or settlement
      with or otherwise agree to waive, modify, amend or change the obligations
      (including collateral obligations) of any such account debtor or other
      obligor.

     

    Section
      3.3 Assignment
      of Insurance.
      As
      additional security for the payment and performance of the Obligations, each
      Borrower hereby assigns to the Lender any and all monies (including proceeds
      of
      insurance and refunds of unearned premiums) due or to become due under, and
      all
      other rights of such Borrower with respect to, any and all policies of insurance
      now or at any time hereafter covering the Collateral or any evidence thereof
      or
      any business records or valuable papers pertaining thereto, and such Borrower
      hereby directs the issuer of any such policy to pay all such monies directly
      to
      the Lender. At any time, whether or not a Default Period then exists, the Lender
      may (but need not), in the Lender’s name or in such Borrower’s name, execute and
      deliver proofs of claims, receive all such monies, endorse checks and other
      instruments representing payment of such monies, and adjust, litigate,
      compromise or release any claim against the issuer of any such
      policy.

     

    
      
        
        

      

      
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    Section
      3.4 Occupancy.

    

    (a) Each
      Borrower hereby irrevocably grants to the Lender the right to take exclusive
      possession of the Premises at any time during a Default Period without notice
      or
      consent.

    

    (b) The
      Lender may use the Premises only to hold, process, manufacture, sell, use,
      store, liquidate, realize upon or otherwise dispose of goods that are Collateral
      and for other purposes that the Lender may in good faith deem to be related
      or
      incidental purposes.

     

    (c) The
      Lender’s right to hold the Premises shall cease and terminate upon the earlier
      of (i) payment in full and discharge of all Obligations and termination of
      this Agreement, and (ii) final sale or disposition of all goods
      constituting Collateral and delivery of all such goods to
      purchasers.

     

    (d) The
      Lender shall not be obligated to pay or account for any rent or other
      compensation for the possession, occupancy or use of any of the Premises;
      provided, however, that if the Lender does pay or account for any rent or other
      compensation for the possession, occupancy or use of any of the Premises, the
      Borrowers shall reimburse the Lender promptly for the full amount thereof.
      In
      addition, the Borrowers will pay, or reimburse the Lender for, all taxes, fees,
      duties, imposts, charges and expenses at any time incurred by or imposed upon
      the Lender by reason of the execution, delivery, existence, recordation,
      performance or enforcement of this Agreement or the provisions of this
Section
      3.4.

     

    Section
      3.5 License.
      Without
      limiting the generality of any other Security Document, each Borrower hereby
      grants to the Lender a non-exclusive, worldwide and royalty-free license to
      use
      or otherwise exploit all Intellectual Property Rights of such Borrower for
      the
      purpose of: (a) completing the manufacture of any in-process materials during
      any Default Period so that such materials become saleable Inventory, all in
      accordance with the same quality standards previously adopted by such Borrower
      for its own manufacturing and subject to such Borrower’s reasonable exercise of
      quality control; and (b) selling, leasing or otherwise disposing of any or
      all Collateral during any Default Period.

     

    Section
      3.6 Financing
      Statements.
      Each
      Borrower authorizes the Lender to file, from time to time, such financing
      statements under the UCC and the PPSA against collateral described as “all
      personal property” or “all assets” or describing specific items of collateral
      including commercial tort claims as the Lender deems necessary or useful to
      perfect the Security Interest. All financing statements filed before the date
      hereof to perfect the Security Interest were authorized by the applicable
      Borrower and are hereby re-authorized. A carbon, photographic or other
      reproduction of this Agreement or of any financing statements signed by any
      Borrower is sufficient as a financing statement and may be filed as a financing
      statement in any state to perfect the security interests granted hereby. For
      this purpose, each Borrower represents and warrants that the information set
      forth on Schedule
      3.6
      hereto
      (as to such Borrower’s exact legal name, address of chief executive office,
      state of organization, organizational identification number, federal employer
      identification number and type of organization) with respect to such Borrower
      is
      true and correct.

     

     

    
      
        
        

      

      
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    Section
      3.7 Setoff.
      The Lender may at any time or from time to time, at its sole discretion and
      without demand and without notice to anyone, setoff any liability owed to any
      Credit Party by the Lender, whether or not due, against any Obligation, whether
      or not due.

     

    Section
      3.8 Collateral.
      This
      Agreement does not contemplate a sale of accounts, contract rights or chattel
      paper, and, as provided by law, the Credit Parties are entitled to any surplus
      and shall remain liable for any deficiency. The Lender’s duty of care with
      respect to Collateral in its possession (as imposed by law) shall be deemed
      fulfilled if it exercises reasonable care in physically keeping such Collateral,
      or in the case of Collateral in the custody or possession of a bailee or other
      third Person, exercises reasonable care in the selection of the bailee or other
      third Person, and the Lender need not otherwise preserve, protect, insure or
      care for any Collateral. The Lender shall not be obligated to preserve any
      rights any Credit Party may have against any other Person, to realize on the
      Collateral at all or in any particular manner or order or to apply any cash
      proceeds of the Collateral in any particular order of application. The Lender
      has no obligation to clean-up or otherwise prepare the Collateral for sale.
      Each
      Credit Party waives any right it may have to require the Lender to pursue any
      third Person for any of the Obligations.

     

    Article
      IV

     

    CONDITIONS
      OF LENDING

     

    Section
      4.1 Conditions
      to Initial Advance. The
      initial Advance hereunder (including, without limitation, the conversion and
      maintenance of the outstanding principal balance of the Term Advance pursuant
      to
Section
      2.1(a)(i)),
      is
      subject to the satisfaction or waiver, immediately prior thereto or concurrently
      therewith, of the following conditions precedent:

     

    (a) Schedule
      of Closing Documents.
      Lender
      shall have received each of the agreements, opinions, reports, approvals,
      consents, certificates and other documents set forth on the Schedule of Closing
      Documents attached hereto as Exhibit
      C.

     

    (b) Fees
      and Expenses.
      Lender
      shall have received payment in full of those fees and expenses referred to
      in
Section
      2.6
      payable
      to it on or before the initial Advance (or an irrevocable authorization to
      pay
      such fees and expenses out of the proceeds of the initial Advance).

     

    Section
      4.2 Conditions
      to Each Advance.
      On
      the
      date of each Advance (including the initial Advance and the conversion and
      maintenance of the outstanding principal balance of the Term Advance pursuant
      to
Section
      2.1(a)(i)),
      both
      immediately before and immediately after giving effect thereto and to the
      application of the proceeds therefrom, the following statements shall be true
      to
      the satisfaction of the Lender (and each request for an Advance, shall
      constitute a representation and warranty by each Credit Party to the Lender
      that
      on the date of such Advance, immediately before and immediately after giving
      effect thereto and to the application of the proceeds therefrom, such statements
      are true):

     

    (a) The
      representations and warranties contained in this Agreement and in each of the
      other Loan Documents are true and correct in all material respects on and as
      of
      the date of such Advance as though made on and as of such date, except (i)
      to
      the extent that such representations and warranties expressly relate solely
      to
      an earlier date (in which case such representations and warranties shall have
      been true and correct in all material respects on and as of such earlier date),
      and (ii) for such representations and warranties that are subject to a Material
      Adverse Effect or other materiality qualifier (in which case such
      representations and warranties are true and correct in all
      respects);

     

     

    
      
        
        

      

      
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    (b) No
      Overadvance exists;

     

    (c) 
      The
      Lender has received (i) a Notice of Borrowing pursuant to Section
      2.2
      and (ii)
      a Borrowing Base Certificate pursuant to Section
      6.1(q);
      and

     

    (d) No
      event
      has occurred and is continuing, or could reasonably be expected to result from
      such Advance or the application of the proceeds thereof, which would constitute
      a Default or an Event of Default.

     

    Article
      V

     

    REPRESENTATIONS
      AND WARRANTIES

     

    Each
      Credit Party represents and warrants to the Lender as follows:

     

    Section
      5.1 Existence
      and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
      Federal Employer Identification Number and Organizational Identification
      Number.
      Each
      Credit Party is a corporation, duly organized, validly existing and in good
      standing under the laws of its jurisdiction of incorporation and is duly
      licensed or qualified to transact business in all jurisdictions where the
      character of the property owned or leased or the nature of the business
      transacted by it makes such licensing or qualification necessary. Each Credit
      Party has all requisite power and authority to conduct its business, to own
      its
      properties and to execute and deliver, and to perform all of its obligations
      under, the Loan Documents. During its existence, each Credit Party has done
      business solely under the names set forth in Schedule
      5.1.
      Each
      Credit Party’s chief executive office and principal place of business is located
      at the address set forth in Section
      3.6,
      all of
      such Credit Party’s records relating to its business or the Collateral are kept
      at that location, and such Credit Party’s chief executive office has not been
      located at any other address in the past five years (except as set forth in
      Schedule
      5.1).
      All
      Inventory and Equipment is located at the Credit Parties’ respective chief
      executive offices or at one of the other locations listed in Schedule
      5.1.
      Each
      Credit Party’s federal employer identification number and organizational
      identification number are correctly set forth in Section
      3.6.

     

    Section
      5.2 Capitalization.
      Schedule
      5.2
      constitutes a correct and complete list of all ownership interests of each
      Credit Party and rights to acquire ownership interests, including the record
      holder, number of interests and percentage interests on a fully diluted basis
      and an organizational chart showing the ownership structure of all Subsidiaries
      of the Credit Parties.

     

     

    
      
        
        

      

      
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    Section
      5.3 Authorization
      of Borrowing; No Conflict as to Law or Agreements.
      The
      execution, delivery and performance by each Credit Party of the Loan Documents
      to which it is a party and the borrowing of each Advance hereunder by each
      Borrower have been duly authorized by all necessary corporate action and do
      not
      and will not (a) require any consent or approval of any Credit Party’s
      Owners; (b) require any authorization, consent or approval by, or
      registration, declaration or filing with, or notice to, any governmental
      department, commission, board, bureau, agency or instrumentality, domestic
      or
      foreign, or any third party, except such authorization, consent, approval,
      registration, declaration, filing or notice as has been obtained, accomplished
      or given prior to the date hereof and except as may be required by or in the
      performance of the Warrant Documents; (c) assuming the accuracy of all of
      the Lender’s representations and warranties set forth in the Loan
      Documents, violate any provision of any law, rule or regulation (including
      Regulation X of the Board of Governors of the Federal Reserve System) or of
      any order, writ, injunction or decree presently in effect having applicability
      to any Credit Party or of any Credit Party’s Constituent Documents;
      (d) result in a breach of or constitute a default under any indenture or
      loan or credit agreement or any other material agreement, lease or instrument
      to
      which any Credit Party is a party or by which it or its properties may be bound
      or affected; or (e) result in, or require, the creation or imposition of
      any Lien (other than the Security Interest) upon or with respect to any of
      the
      properties now owned or hereafter acquired by any Credit Party.

     

    Section
      5.4 Legal
      Agreements.
      This
      Agreement and each other Loan Document to which any Credit Party is a party
      constitutes the legal, valid and binding obligations of such Credit Party,
      enforceable against it in accordance with its terms except as such
      enforceability may be limited by general principles of equity or by applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation and other
      similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies. 

     

    Section
      5.5 Subsidiaries.
      Except
      as set forth on Schedule
      5.5
      hereto,
      no Credit Party has any Subsidiaries.

     

    Section
      5.6 Financial
      Condition; No Adverse Change.
      Workstream has furnished to the Lender the consolidated audited financial
      statements of Workstream and its Subsidiaries for the fiscal year ended May
      31,
      2006 and the consolidated unaudited financial statements of Workstream and
      its
      Subsidiaries for the fiscal-year-to-date period ended July 31, 2006, and those
      statements fairly present the financial condition of Workstream and its
      Subsidiaries on the dates thereof and the results of its operations and cash
      flows for the periods then ended and were prepared in accordance with GAAP,
      consistently applied. Since the date of the most recent financial statements
      delivered to the Lender, there has been no change in any Credit Party’s
      business, properties, operations (including results of operations), condition
      (financial or otherwise) or prospects which has had or could be expected to
      have, individually or collectively, a Material Adverse Effect.

     

    Section
      5.7 Litigation.
      There
      are no actions, suits or proceedings pending or, to any Credit Party’s
      knowledge, threatened against or affecting any Credit Party or any of its
      Affiliates or the properties of any Credit Party or any of its Affiliates before
      any court or governmental department, commission, board, bureau, agency or
      instrumentality, domestic or foreign, other than those matters specifically
      listed in Schedule
      5.7
      or
      matters with respect to which notice is not required to be given to Lender
      pursuant to Section
      6.1(e).

     

     

    
      
        
        

      

      
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    Section
      5.8 Regulation U.
      No
      Credit Party is engaged in the business of extending credit for the purpose
      of
      purchasing or carrying margin stock (within the meaning of Regulation U of
      the
      Board of Governors of the Federal Reserve System), and no part of the proceeds
      of any Advance will be used to purchase or carry any margin stock or to extend
      credit to others for the purpose of purchasing or carrying any margin
      stock.

     

    Section
      5.9 Taxes.
      Each
      Credit Party and each of its Affiliates (i) has timely made or filed all
      foreign, federal and state income and all other tax returns, reports and
      declarations required by any jurisdiction to which it is subject, (ii) has
      timely paid all taxes and other governmental assessments and charges (including
      withholding) that are material in amount, shown or determined to be due on
      such
      returns, reports and declarations, except those being contested in good faith
      and (iii) has set aside on its books provision reasonably adequate for the
      payment of all taxes for periods subsequent to the periods to which such
      returns, reports or declarations apply. There are no unpaid taxes in any
      material amount claimed to be due by the taxing authority of any jurisdiction,
      and the officers of the Credit Parties know of no basis for any such
      claim.

     

    Section
      5.10 Title
      and Liens.
      Each
      Credit Party has good and absolute title to all Collateral free and clear of
      all
      Liens, other than Permitted Liens. No UCC or PPSA financing statement (or the
      equivalent thereof in any jurisdiction) naming any Credit Party as debtor is
      on
      file in any office except to perfect only Permitted Liens.

     

    Section
      5.11 Intellectual
      Property Rights. 

     

    (a) Schedule
      5.11
      contains
      a complete and accurate list, as of the Amendment Closing Date, of all (i)
      patented or registered Intellectual Property Rights owned or used by any Credit
      Party, (ii) pending patent applications and applications for other registrations
      of Intellectual Property Rights filed by or on behalf of any Credit Party,
      (iii)
      material unregistered Intellectual Property Rights owned or used by any Credit
      Party and (iv) material software owned by any Credit Party together with other
      software used in the business (other than commercially-available, off-the-shelf
      software purchased or licensed for a total cost of less than $10,000)
      (“Software”).
      Schedule
      5.11
      also
      contains a complete and accurate list, as of the Amendment Closing Date, of
      all
      licenses or similar agreements or similar agreements or arrangements to which
      any Credit Party is a party, either as licensee or licensor, for Intellectual
      Property Rights (excluding licenses for unmodified, commercially-available,
      off-the-shelf software purchased or licensed for a total cost of less than
      $10,000), in each case identifying the subject Intellectual Property Rights.
      Each Credit Party has taken all reasonable necessary steps to maintain and
      protect the Intellectual Property Rights which its owns and uses. 

     

    (b) Each
      Credit Party owns and possesses or has the right to use and as of the Amendment
      Closing Date shall own and possess all right, title and interest to, or has
      the
      right to use pursuant to a valid and enforceable license, all Intellectual
      Property Rights necessary for the operation of the businesses of such Credit
      Party as presently conducted and as presently proposed to be conducted, free
      and
      clear of all encumbrances and liens (other than restrictions on transfer of
      licensed Intellectual Property Rights). Without limiting the generality of
      the
      foregoing, each Credit Party owns and possesses all right, title and interest
      in
      and to all Intellectual Property Rights (including software, processes and
      systems) created or developed by such Credit Party’s employees and independent
      contractors or under the direction or supervision of such Credit Party’s
      employees or independent contractors relating to the business of such Credit
      Party. 

     

     

    
      
        
        

      

      
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    (c) Except
      as
      set forth on Schedule
      5.11
      or any
      of the following with respect to which notice is not required to be given to
      Lender pursuant to Section
      6.1(e),
      (i)
      there have been no claims made against any Credit Party asserting the
      invalidity, misuse or unenforceability of any of the Intellectual Property
      Rights owned or used by any Credit Party, and to the best knowledge of each
      Credit Party, there is no basis for any such claim, (ii) no Credit Party has
      received any notices of, and has no knowledge of any facts which indicate a
      reasonable likelihood of, any infringement or misappropriation by, or conflict
      with, any third party with respect to any Intellectual Property Rights
      (including any demand or request that any Credit Party license any rights from
      a
      third party), (iii) the conduct of each Credit Party’s business has not
      infringed, misappropriated or conflicted with and does not infringe,
      misappropriate or conflict with any Intellectual Property Rights of other
      Persons, (iv) each Credit Party has the right to use and license the
      Intellectual Property Rights, free and clear of any claim or conflict with
      the
      rights of others, (v) no royalties, honorariums or fees are payable by any
      Credit Party to any Person by reason of the ownership or use of any of the
      Intellectual Property Rights, and (vi) the transactions contemplated by this
      Agreement will not have a Material Adverse Effect on any Credit Party’s right,
      title or interest in and to the Intellectual Property Rights listed on
Schedule
      5.11
      and all
      of such Intellectual Property Rights shall be owned or available for use by
      the
      Credit Parties on identical terms and conditions immediately after the Closing.
      

     

    (d)
      No
      government funding, facilities of a university, college, other educational
      institution or research center or funding from third parties was used in the
      development of the Intellectual Property Rights owned by any Credit
      Party.

     

    (e)
      The
      validity of the Intellectual Property Rights owned by any Credit Party and
      title
      thereto and, to the best knowledge of each Credit Party, the validity of any
      Intellectual Property Rights licensed to any Credit Party (i) have not been
      questioned in any prior proceeding; (ii) are not being questioned in any pending
      proceeding; and (iii) are not the subject(s) of any threatened or proposed
      proceeding. The consummation of the transactions contemplated by this Agreement
      will not result in the termination or impairment of any Credit Party’s rights to
      use or otherwise exploit any of the Intellectual Property Rights in the manner
      such Intellectual Property Rights was used or otherwise exploited prior to
      the
      consummation of the transactions contemplated by this Agreement, and will not
      require the consent of any governmental authority or third party in respect
      of
      such Intellectual Property Rights.

     

    (f)
      Except
      as
      set forth on Schedule
      5.11,
      none of
      the Software used in connection with the business of any Credit Party
      incorporates or is based on or is a derivative work of any third party code
      that
      is subject to the terms of, or licensed to any Credit Party pursuant to, any
      form of public source or “open source” license, such that the public source or
“open source” license imposes conditions on the terms and conditions under which
      the Software may be used or distributed.

     

     

    
      
        
        

      

      
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    (g)
      Each
      Credit Party has entered into a legally enforceable agreement with each of
      its
      employees and independent contractors obligating each such Person to assign
      to
      such Credit Party, without any additional compensation, any Intellectual
      Property Rights created, discovered or invented by such Person in the course
      of
      such Person’s employment or engagement with such Credit Party (except to the
      extent prohibited by law), and further requiring such Person to cooperate with
      such Credit Party, without any additional compensation, in connection with
      securing and enforcing any Intellectual Property Rights therein; provided,
      however,
      that
      the foregoing shall not apply with respect to employees and independent
      contractors whose job descriptions are of the type such that no such assignments
      are reasonably foreseeable.

     

    Section
      5.12 Plans.
      Except
      as disclosed to the Lender in writing prior to the date hereof, no Credit Party
      or ERISA Affiliate (a) maintains or has maintained any Pension Plan,
      (b) contributes or has contributed to any Multiemployer Plan or (c)
      provides or has provided post-retirement medical or insurance benefits with
      respect to employees or former employees (other than benefits required under
      Section 601 of ERISA, Section 4980B of the IRC or applicable state law). No
      Credit Party or ERISA Affiliate has received any notice or has any knowledge
      to
      the effect that it is not in full compliance with any of the requirements of
      ERISA, the IRC or applicable state law with respect to any Plan. No Reportable
      Event exists in connection with any Pension Plan. Each Plan which is intended
      to
      qualify under the IRC is so qualified, and no fact or circumstance exists which
      may have an adverse effect on the Plan’s tax-qualified status. No Credit Party
      or ERISA Affiliate has (x) any accumulated funding deficiency (as defined
      in Section 302 of ERISA and Section 412 of the IRC) under any Plan, whether
      or
      not waived, (y) any liability under Section 4201 or 4243 of ERISA for any
      withdrawal, partial withdrawal, reorganization or other event under any
      Multiemployer Plan or (z) any liability or knowledge of any facts or
      circumstances which could result in any liability to the Pension Benefit
      Guaranty Corporation, the Internal Revenue Service, the Department of Labor
      or
      any participant in connection with any Plan (other than routine claims for
      benefits under the Plan).

     

    Section
      5.13 Default.
      Each
      Credit Party is in compliance with all provisions of all agreements,
      instruments, decrees and orders to which it is a party or by which it or its
      property is bound or affected, the breach or default of which could have a
      Material Adverse Effect.

     

    Section
      5.14 Environmental
      Matters. 

     

    (a) Except
      as
      disclosed on Schedule
      5.14,
      there
      are not present in, on or under the Premises any Hazardous Substances in such
      form or quantity as to create any material liability or obligation for any
      Credit Party or the Lender under the common law of any jurisdiction or under
      any
      Environmental Law, and no Hazardous Substances have ever been stored, buried,
      spilled, leaked, discharged, emitted or released in, on or under the Premises
      in
      such a way as to create any such material liability.

     

    
      
        
        

      

      
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    (b) Except
      as
      disclosed on Schedule
      5.14,
      no
      Credit Party has disposed of Hazardous Substances in such a manner as to create
      any material liability under any Environmental Law.

     

    (c) Except
      as
      disclosed on Schedule
      5.14,
      there
      have not existed in the past, nor to the best of each Credit Party’s knowledge
      are there any threatened or impending requests, claims, notices, investigations,
      demands, administrative proceedings, hearings or litigation relating in any
      way
      to the Premises or any Credit Party, alleging, material liability under,
      violation of, or noncompliance with any Environmental Law or any license, permit
      or other authorization issued pursuant thereto.

     

    (d) Except
      as
      disclosed on Schedule
      5.14,
      each
      Credit Party’s business is and has in the past always been conducted in
      accordance with all Environmental Laws and all licenses, permits and other
      authorizations required pursuant to any Environmental Law and necessary for
      the
      lawful and efficient operation of such businesses are in such Credit Party’s
      possession and are in full force and effect, and no Credit Party has been denied
      insurance on grounds related to potential environmental liability. No permit
      required under any Environmental Law is scheduled to expire within 12 months
      and
      there is no threat that any such permit will be withdrawn, terminated, limited
      or materially changed.

     

    (e) Except
      as
      disclosed on Schedule
      5.14,
      the
      Premises are not and never have been listed on the National Priorities List,
      the
      Comprehensive Environmental Response, Compensation and Liability Information
      System or any similar federal, state or local list, schedule, log, inventory
      or
      database.

     

    (f) Each
      Credit Party has delivered to the Lender all environmental assessments, audits,
      reports, permits, licenses and other documents within such Credit Party’s
      possession or control describing or relating in any way to the Premises or
      such
      Credit Party’s business.

     

    Section
      5.15 Intentionally
      Deleted.

     

    Section
      5.16 Financing
      Statements.
      Each
      Credit Party has authorized the filing of UCC and PPSA financing statements
      sufficient when filed to perfect the Security Interest and the other security
      interests created by the Security Documents. When such financing statements
      are
      filed in the offices noted therein, the Lender will have a valid and perfected
      security interest in all Collateral which is capable of being perfected by
      filing financing statements.

     

    Section
      5.17 Rights
      to Payment.
      Each
      right to payment and each instrument, document, chattel paper and other
      agreement constituting or evidencing Collateral is (or, in the case of all
      future Collateral, will be when arising or issued) the valid, genuine and
      legally enforceable obligation, subject to no defense, setoff or counterclaim,
      of the account debtor or other obligor named therein or in the applicable Credit
      Party’s records pertaining thereto as being obligated to pay such
      obligation.

     

    Section
      5.18 Financial
      Solvency.
      Both
      before and after giving effect to all of the transactions contemplated in the
      Loan Documents, no Credit Party or its Subsidiaries:

     

    (a) Was
      or
      will be insolvent, as that term is used and defined in Section 101(32) of the
      United States Bankruptcy Code and Section 2 of the Uniform Fraudulent Transfer
      Act;

     

    
      
        
        

      

      
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    (b) Has
      unreasonably small capital or is engaged or about to engage in a business or
      a
      transaction for which any remaining assets of such Credit Party or such
      Subsidiary are unreasonably small;

     

    (c) By
      executing, delivering or performing its obligations under the Loan Documents
      or
      other documents to which it is a party or by taking any action with respect
      thereto, intends to, nor believes that it will, incur debts beyond its ability
      to pay them as they mature;

     

    (d) By
      executing, delivering or performing its obligations under the Loan Documents
      or
      other documents to which it is a party or by taking any action with respect
      thereto, intends to hinder, delay or defraud either its present or future
      creditors; and

     

    (e) At
      this
      time contemplates filing a petition in bankruptcy or for an arrangement or
      reorganization or similar proceeding under any law of any jurisdiction, nor,
      to
      the best knowledge of any Credit Party , is the subject of any actual, pending
      or threatened bankruptcy, insolvency or similar proceedings under any law of
      any
      jurisdiction.

     

    Section
      5.19 Additional
      Representations and Warranties.
      Without
      limiting any representation or warranty herein contained, each of the
      representations and warranties set forth in the Transaction Agreement is true
      and correct in all material respects to the extent applicable to any Credit
      Party, in each case as if fully set forth herein.

     

    Article
      VI

     

    COVENANTS

     

    So
      long
      as the Obligations shall remain unpaid, or this Agreement shall remain in
      effect, each Credit Party will comply with the following requirements, unless
      the Lender shall otherwise consent in writing:

     

    Section
      6.1 Reporting
      Requirements.
      Each
      Credit Party will deliver, or cause to be delivered, to the Lender each of
      the
      following, each of which shall be in form and detail acceptable to the
      Lender:

     

    (a) Annual
      Financial Statements.
      As soon
      as available, and in any event within 120 days after the end of each fiscal
      year
      of Workstream and its Subsidiaries, their audited financial statements with
      the
      unqualified opinion of independent certified public accountants selected by
      it
      and acceptable to the Lender, which annual financial statements shall include
      its balance sheet as at the end of such fiscal year and the related statements
      of income, retained earnings and cash flows for the fiscal year then ended,
      prepared, if the Lender so requests, on a consolidating and consolidated basis
      to include any Subsidiary, all in reasonable detail and prepared in accordance
      with GAAP, together with (i) copies of all management letters prepared by
      such accountants; and (ii) a certificate of the Borrower Representative’s chief
      financial officer, as applicable, substantially in the form of Exhibit
      D
      hereto,
      stating (A) that such financial statements have been prepared in accordance
      with GAAP and fairly represent the financial position and the results of
      operations of Workstream and its Subsidiaries, (B) whether or not such
      Officer has knowledge of the occurrence of any Default or Event of Default
      not
      theretofore reported and remedied and, if so, stating in reasonable detail
      the
      facts with respect thereto, and (C) all relevant facts in reasonable detail
      to evidence, and the computations as to, whether or not the Credit Parties
      are
      in compliance with the Financial Covenants.

     

     

    
      
        
        

      

      
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    (b) Monthly
      Financial Statements.
      As soon
      as available and in any event within 30 days after the end of each month, an
      unaudited/internal balance sheet and statements of income and retained earnings
      of Workstream and its Subsidiaries as at the end of and for such month and
      for
      the year to date period then ended, prepared, if the Lender so requests, on
      a
      consolidating and consolidated basis to include any Subsidiary, in reasonable
      detail and stating in comparative form the figures for the corresponding date
      and periods in the previous year, all prepared in accordance with GAAP, subject
      to normal recurring year-end audit adjustments and the absence of footnote
      disclosures required by GAAP and which fairly represent the financial position
      and the results of operations of Workstream and its Subsidiaries; and
      accompanied by a certificate of the Borrower Representative’s chief financial
      officer, substantially in the form of Exhibit
      D
      hereto
      stating (i) that such financial statements have been prepared in accordance
      with GAAP, subject to normal recurring year-end audit adjustments and the
      absence of footnote disclosures required by GAAP, and fairly represent the
      financial position and the results of operations of Workstream and its
      Subsidiaries, (ii) whether or not such Officer has knowledge of the
      occurrence of any Default or Event of Default not theretofore reported and
      remedied and, if so, stating in reasonable detail the facts with respect
      thereto, and (iii) all relevant facts in reasonable detail to evidence, and
      the computations as to, whether or not the Credit Parties are in compliance
      with
      the Financial Covenants.

     

    (c) Collateral
      Reports.
      No
      later than the second Business Day of each week, a current accounts receivable
      detail report, and no later than the second Business Day of each month a detail
      accounts receivable aging report, in each case, as of the end of the immediately
      preceding week or month (as the case may be) and such other reports reasonably
      requested by the Lender in accordance with the current reporting procedures
      of
      the Credit Parties, in each case, certified as true and correct by an Officer
      of
      the Borrower Representative. The Borrowers shall also provide the information
      required by the immediately preceding sentence to the Lender, together with
      agings of the Borrowers’ Accounts, on a monthly basis within 10 days after the
      end of each month, calculated as of the last day of the month most recently
      ended. In addition, the Borrowers shall provide to the Lender promptly, and
      in
      any event within five Business Days following any request by the Lender, such
      other information regarding the Collateral as the Lender may request, in each
      case in such form and detail as the Lender may reasonably request.

     

    (d) Projections.
      No later
      than 30 days prior to the last day of each fiscal year, the projected balance
      sheets, income statements, and statements of cash flow of Workstream and its
      Subsidiaries for each month of the succeeding fiscal year, each in reasonable
      detail. Such items will be certified by the Borrower Representative’s chief
      financial officer as being the most accurate projections available and identical
      to the projections used by the Credit Parties for internal planning purposes
      and
      be delivered with a statement of underlying assumptions and such supporting
      schedules and information as the Lender may in its discretion
      require.

     

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (e) Litigation.
      Immediately after becoming aware of the commencement thereof, notice in writing
      of all litigation and of all proceedings before any governmental or regulatory
      agency affecting any Credit Party (i) of the type described in Section
      5.14(c)
      or
      (ii) which seek a monetary recovery against any Credit Party in excess of
      $50,000.

     

    (f) Defaults.
      When
      any Officer of a Credit Party becomes aware of the probable occurrence of any
      Default or Event of Default, no later than three days after such Officer becomes
      aware of such Default or Event of Default, notice of such occurrence, together
      with a detailed statement by a responsible Officer of such Credit Party of
      the
      steps being taken by any Credit Party to cure the effect thereof.

     

    (g) Plans.
      As soon
      as possible, and in any event within 30 days after any Credit Party knows
      or has reason to know that any Reportable Event with respect to any Pension
      Plan
      has occurred, a statement of the Borrower Representative’s chief financial
      officer setting forth details as to such Reportable Event and the action which
      the Credit Parties propose to take with respect thereto, together with a copy
      of
      the notice of such Reportable Event to the Pension Benefit Guaranty Corporation.
      As soon as possible, and in any event within 10 days after any Credit Party
      fails to make any quarterly contribution required with respect to any Pension
      Plan under Section 412(m) of the IRC, the Borrower Representative will deliver
      to the Lender a statement of the Borrower Representative’s chief financial
      officer setting forth details as to such failure and the action which the Credit
      Parties propose to take with respect thereto, together with a copy of any notice
      of such failure required to be provided to the Pension Benefit Guaranty
      Corporation. As soon as possible, and in any event within ten days after any
      Credit Party knows or has reason to know that it has or is reasonably expected
      to have any liability under Sections 4201 or 4243 of ERISA for any withdrawal,
      partial withdrawal, reorganization or other event under any Multiemployer Plan,
      the Borrower Representative will deliver to the Lender a statement of the
      Borrower Representative’s chief financial officer setting forth details as to
      such liability and the action which the Credit Parties propose to take with
      respect thereto.

     

    (h) Officers
      and Directors.
      Promptly upon knowledge thereof, notice of any change in the persons
      constituting any Credit Party’s Executive Officers and Directors.

     

    (i) Collateral.
      Promptly upon knowledge thereof, notice of any material loss of or material
      damage to any Collateral or of any substantial adverse change in any Collateral
      or the prospect of payment thereof.

     

    (j) Commercial
      Tort Claims.
      Promptly upon knowledge thereof, notice of any commercial tort claims it may
      bring against any Person, including the name and address of each defendant,
      a
      summary of the facts, an estimate of the applicable Credit Party’s damages,
      copies of any complaint or demand letter submitted by such Credit Party, and
      such other information as the Lender may request.

     

    (k) Intellectual
      Property.

     

    (i) Thirty
      days’ prior written notice of its intent to acquire material Intellectual
      Property Rights, and, except for transfers permitted under Section
      6.18,
      thirty
      days’ prior written notice of its intent to dispose of material Intellectual
      Property Rights. Upon request, each Credit Party shall provide the Lender with
      copies of all proposed documents and agreements concerning such
      rights.

     

    
      
        
        

      

      
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    (ii) Promptly
      upon knowledge thereof, notice of (A) any Infringement of its Intellectual
      Property Rights by others, (B) claims that any Credit Party is Infringing
      another Person’s Intellectual Property Rights and (C) any threatened
      cancellation, termination or material limitation of its Intellectual Property
      Rights.

     

    (iii) Promptly
      upon knowledge thereof, notice of the existence of any of the following (to
      the
      extent not set forth on Schedule
      5.11
      as of
      the Amendment Closing Date), (A) patented or registered Intellectual Property
      Rights owned or used by any Credit Party, (B) pending patent applications and
      applications for other registrations of Intellectual Property Rights filed
      by or
      on behalf of any Credit Party, (C) unregistered Intellectual Property Rights
      owned by any Credit Party relating to proprietary software or products and
      material to the conduct of such Credit Party’s business and operations, and (D)
      material Software, (E) licenses or similar agreements or similar agreements
      or
      arrangements to which any Credit Party is a party, either as licensee or
      licensor, for Intellectual Property Rights (excluding licenses for unmodified,
      commercially-available, off-the-shelf software purchased or licensed for a
      total
      cost of less than $10,000). 

     

    (iv) Promptly
      upon receipt, copies of all registrations and filings with respect to its
      Intellectual Property Rights.

     

    (l) Reports
      to Owners.
      Promptly upon their distribution, copies of all financial statements, reports
      and proxy statements which any Credit Party shall have sent to its
      Owners.

     

    (m) SEC
      Filings.
      Promptly (and in any event within two Business Days) after the sending or filing
      thereof, copies of all regular and periodic reports which any Credit Party
      shall
      file with the Securities and Exchange Commission or any securities
      exchange.

     

    (n) Tax
      Returns of the Credit Parties.
      As soon
      as possible, and in any event no later than five days after they are due to
      be filed, copies of the state and federal income tax returns and all schedules
      thereto of each Credit Party.

     

    (o) Tax
      Returns and Personal Financial Statements of Guarantors.
      As soon
      as possible and in any event no later than April 30th
      of each
      year, the current personal financial statement and state and federal income
      tax
      returns and all schedules thereto of each Guarantor that is an
      individual.

     

    (p) Violations
      of Law.
      Promptly upon knowledge thereof, notice of any Credit Party’s violation of any
      law, rule or regulation, the non-compliance with which could have a Material
      Adverse Effect.

     

    (q) Borrowing
      Base Certificate.
      upon
      request by the Lender at any time and in any event together with each Notice
      of
      Borrowing submitted to Lender pursuant to Section 2.2, a borrowing base
      certificate (each a “Borrowing
      Base Certificate”)
      in
      form and substance satisfactory to the Lender, duly completed, detailing
      Borrower’s Qualified Accounts as of the date of submission thereof, and
      certified by and certified by the chief executive Officer or chief financial
      Officer of Borrower Representative. In addition, each Borrowing Base Certificate
      shall have attached to it such additional schedules and/or other information
      as
      Lender may reasonably request. 

     

     

    
      
        
        

      

      
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    (r) Other
      Reports.
      From
      time to time, with reasonable promptness, any and all schedules with respect
      to
      Accounts, Inventory or Equipment, collection reports, deposit records, copies
      of
      invoices to account debtors, shipment documents and delivery receipts for goods
      sold and such other materials, reports, records or information as the Lender
      may
      request. In addition, the Credit Parties shall deliver to the Lender a written
      report, in form satisfactory to the Lender, of Qualified Cash at such time
      or
      times as may be requested by the Lender, together with such supporting detail
      as
      the Lender may reasonably require.

     

    Section
      6.2 Minimum
      Availability.
      The
      Credit Parties shall maintain at all times unused availability under the
      Borrowing Base of $1,000,000.

     

    Section
      6.3 Permitted
      Liens; Financing Statements.

     

    (a) No
      Credit
      Party will create, incur or suffer to exist any Lien on any of its assets,
      now
      owned or hereafter acquired; excluding,
      however,
      from
      the operation of the foregoing, the following (each a “Permitted
      Lien”;
      collectively, “Permitted
      Liens”):

     

    (i) Liens
      securing the promissory note of Workstream and Workstream USA dated December
      30,
      2004, payable to ProAct Technologies Corp. in the original principal amount
      of
      $1,530,000, which the Credit Parties hereby represent and warrant are in the
      maximum approximate remaining outstanding amount of $275,000 as of the Amendment
      Closing Date (but which amount the Credit Parties dispute); other Liens
      which are in existence on the date hereof to the extent (but only to the extent)
      listed in Schedule
      6.3
      hereto,
      all of which other Liens, in the aggregate, are immaterial;

     

    (ii) The
      Security Interest and Liens created by the Security Documents; or otherwise
      in
      favor of the Lender;

     

    (iii) Purchase
      money Liens relating to the acquisition of machinery and equipment of the Credit
      Parties not exceeding the lesser of cost or fair market value thereof not
      exceeding $150,000 in the aggregate during any fiscal year, and
      so
      long as no Default Period is then in existence and none would exist immediately
      after such acquisition;

     

    (iv) Liens
      for
      taxes, assessments, or similar charges, incurred in the ordinary course of
      business that are not yet due and payable; 

     

    (v) Pledges
      or deposits made in the ordinary course of business to secure payment of
      workmen’s compensation, or to participate in any fund in connection with
      workmen’s compensation, unemployment insurance, old-age pensions or other social
      security programs; 

     

     

    
      
        
        

      

      
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    (vi) Liens
      of
      mechanics, materialmen, warehousemen, carriers, or other like liens, securing
      obligations incurred in the ordinary course of business that are not yet due
      and
      payable;

     

    (vii) Good
      faith pledges or deposits made in the ordinary course of business to secure
      performance of bids, tenders, contracts (other than for the repayment of
      borrowed money) or leases, not in excess of ten percent (10%) of the aggregate
      amount due thereunder, or to secure statutory obligations, or surety, appeal,
      indemnity, performance or other similar bonds required in the ordinary course
      of
      business; 

     

    (viii) Encumbrances
      consisting of zoning restrictions, easements or other restrictions on the use
      of
      real property, none of which materially impairs the use of such property by
      any
      Credit Party in the operation of its business, and none of which is violated
      in
      any material respect by existing or proposed structures or land use;
      and

     

    (ix) The
      following, if the validity or amount thereof is being contested in good faith
      by
      appropriate and lawful proceedings, so long as levy and execution thereon have
      been stayed and continue to be stayed and they do not, in the aggregate,
      materially detract from the value of the property of any Credit Party, or
      materially impair the use thereof in the operation of its business:

     

    (A) Claims
      or
      liens for taxes, assessments or charges due and payable and subject to interest
      or penalty; 

     

    (B) Claims,
      liens and encumbrances upon, and defects or title to, real or personal property,
      including any attachment of personal or real property or other legal process
      prior to adjudication of a dispute on the merits; 

     

    (C) Claims
      or
      liens of mechanics, materialmen, warehousemen, carriers, or other like liens;
      and

     

    (D) Adverse
      judgments on appeal.

     

    (b) No
      Credit
      Party will amend any financing or registration statements in favor of the Lender
      except as permitted by law. Any authorization by the Lender to any Person to
      amend financing statements in favor of the Lender shall be in
      writing.

     

    Section
      6.4 Indebtedness.
      No
      Credit Party will incur, create, assume or permit to exist any Indebtedness
      or
      liability on account of deposits or advances or any Indebtedness for borrowed
      money or letters of credit, or any other Indebtedness or liability evidenced
      by
      notes, bonds, debentures or similar obligations, except:

     

    (a) Debt
      arising hereunder;

     

    (b) Debt
      under the promissory note referred to in clause (i) of Section
      6.3(a)
      (which
      note shall not be amended); Debt under a promissory note in the original
      principal amount of $500,000, made by one or more Credit Parties to the order
      of
      Exxceed, Inc. (which note shall not be amended), of which approximately $249,000
      remains outstanding as of the Amendment Closing Date; and other Debt in
      existence on the date hereof, to the extent (and only to the extent and in
      the
      amount), listed in Schedule
      6.4
      hereto
      and not paid off at Closing (all of which other Debt is immaterial in the
      aggregate);

     

     

    
      
        
        

      

      
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    (c) Debt
      relating to Permitted Liens; and

     

    (d) Any
      Subordinated Debt which Lender may hereafter, in its sole discretion, agree
      to
      permit.

     

    Section
      6.5 Guaranties.
      No
      Credit Party will assume, guarantee, endorse or otherwise become directly or
      contingently liable in connection with any obligations of any other Person,
      except:

     

    (a) the
      endorsement of negotiable instruments by a Credit Party for deposit or
      collection or similar transactions in the ordinary course of business;
      and

     

    (b) guaranties,
      endorsements and other direct or contingent liabilities in connection with
      the
      obligations of other Persons, in existence on the date hereof to the extent
      (and
      only to the extent and in the amount) listed in Schedule
      6.4
      hereto,
      all of which are immaterial in the aggregate.

     

    Section
      6.6 Investments
      and Subsidiaries.
      No
      Credit Party will make or permit to exist any loans or advances to, or make
      any
      investment or acquire any interest whatsoever in, any Affiliate of such Credit
      Party or other Person, including any partnership or joint venture, nor purchase
      or hold beneficially any stock or other securities or evidence of Indebtedness
      of any other Person or Affiliate of such Credit Party, except:

     

    (a) Investments
      in direct obligations of the United States of America or any agency or
      instrumentality thereof whose obligations constitute full faith and credit
      obligations of the United States of America having a maturity of one year or
      less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
      Standard & Poor’s Ratings Services or “P-1” or “P-2” by Moody’s
      Investors Service or certificates of deposit or bankers’ acceptances having a
      maturity of one year or less issued by members of the Federal Reserve System
      having deposits in excess of $100,000,000 (which certificates of deposit or
      bankers’ acceptances are fully insured by the Federal Deposit Insurance
      Corporation);

     

    (b) Ordinary
      operating amounts such as travel advances or loans to the Credit Parties’
Officers and employees not exceeding at any one time an aggregate of $50,000,
      and prepaid rent not exceeding one month or security deposits; and

     

    (c) Current
      (but not any future) investments in the Subsidiaries in existence on the date
      hereof and listed in Schedule
      5.5
      hereto.

     

    Without
      limiting the foregoing, no Credit Party shall create any new Subsidiary or
      cease
      to own 100% of the equity interests in its Subsidiaries.

     

    Section
      6.7 Dividends
      and Distributions.
      No
      Credit Party will declare or pay any dividends (other than dividends payable
      solely in stock of such Credit Party) on any class of its stock or make any
      payment on account of the purchase, redemption or other retirement of any shares
      of such stock or make any distribution in respect thereof, either directly
      or
      indirectly, in each case other than ordinary course intercompany dividends
      and
      distributions necessary for normal operations, consistent with past practice,
      but in no event in any way or manner or amount which would have any material
      adverse impact on the Lender’s rights to the Collateral or its security
      interests or position. Notwithstanding the foregoing, no Credit Party shall
      make
      any cash dividend or distribution to Workstream if, as a result thereof, the
      sum
      of cash and investments described in Section 6.6(a) held at such time by
      Workstream shall exceed $1,000,000, all of which constitutes Qualified Cash
      or
      is held in a Securities Account in accordance with Section
      6.10(f).

     

     

    
      
        
        

      

      
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    Section
      6.8 Salaries.
      Excluding stock options, no Credit Party will increase the salary, bonus,
      commissions, consultant fees or other compensation of any Director, Officer
      or
      consultant, or any member of their families, by more than 10% in any one year,
      either individually or for all such persons in the aggregate.

     

    Section
      6.9 Restricted
      Payments.
      No
      Credit Party shall make any Restricted Payment.

     

    Section
      6.10 Books
      and Records; Collateral Examination, Inspection and Appraisals; Deposit Account
      Agreements and Securities Account Agreements.
      

     

    (a) Each
      Credit Party will keep accurate books of record and account for itself
      pertaining to the Collateral and pertaining to its business and financial
      condition and such other matters as the Lender may from time to time request
      in
      which true and complete entries will be made in accordance with GAAP and, upon
      the Lender’s request, will permit any officer, employee, attorney, accountant or
      other agent of the Lender to audit, review, make extracts from or copy any
      and
      all company and financial books and records at all times during ordinary
      business hours, to send and discuss with account debtors and other obligors
      requests for verification of amounts owed to the Credit Parties, and to discuss
      the Credit Parties’ affairs with any of their respective Directors, Officers,
      employees or agents.

     

    (b) Each
      Credit Party hereby irrevocably authorizes all accountants and third parties
      to
      disclose and deliver to the Lender or its designated agent, at such Credit
      Party’s expense, all financial information, books and records, work papers,
      management reports and other information in their possession regarding such
      Credit Party.

     

    (c) Each
      Credit Party will permit the Lender or its employees, accountants, attorneys
      or
      agents, to examine and inspect any Collateral or any other property of such
      Credit Party at any time during ordinary business hours.

     

    (d) The
      Lender may also, from time to time, obtain at the Credit Parties’ expense an
      appraisal of all or any part of the Collateral by an appraiser acceptable to
      the
      Lender in its sole discretion. 

     

    (e) (i) Within
      thirty (30) days after the Amendment Closing Date, each Borrower shall have
      established and shall thereafter maintain in existence one or more lockboxes
      (each a “Lockbox”)
      with
      one or more financial institutions selected by such Borrower and reasonably
      acceptable to Lender (each a “Lockbox
      Bank”)
      and
      shall instruct all account debtors on the Accounts of such Borrower to remit
      all
      payments to a Lockbox. At all times following such establishment, all payments
      remitted by account debtors of a Borrower to any Lockbox, all other amounts
      received by a Borrower from any account debtor and all other cash received
      by a
      Borrower from any other source (including, without limitation, proceeds of
      dispositions permitted pursuant to Section
      6.18)
      shall
      in each case immediately upon receipt thereof be deposited into an account
      (each
      a “Lockbox
      Account”)
      maintained by such Borrower with a Lockbox Bank.

     

     

    
      
        
        

      

      
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    (ii) Within
      thirty (30) days after the Amendment Closing Date, each Borrower, Lender and
      each Lockbox Bank shall have entered into a control agreement in form and
      substance satisfactory to Lender (each a “Lockbox
      Account Agreement”),
      providing, among other things, that all available amounts held in each Lockbox
      Account maintained at such Lockbox Bank shall be wired on each Business Day
      into
      the Lender’s Account.

    

    (iii) Each
      Credit Party shall have valid and effective Deposit Account Agreements or
      Lockbox Agreements, as applicable, in place at all times with respect to all
      of
      its Deposit Accounts (other than any payroll account so long as such payroll
      account is a zero balance account) while any Obligation remains outstanding.
      No
      Deposit Accounts shall be established, used or maintained by any Credit Party
      unless it complies with the foregoing. With respect to each Deposit Account
      that
      is subject to a Deposit Account Agreement, from and after the occurrence of
      an
      Event of Default, the Lender shall have the right, at any time and from time
      to
      time, to exercise its rights under such Deposit Account Agreement, including,
      for the avoidance of doubt, the exclusive right to give instructions to the
      financial institution at which such Deposit Account is maintained as to the
      disposition of funds or other property on deposit therein or credited thereto.
      In connection with its exercise of such rights, without limiting the generality
      of the foregoing, the Lender may, at its option, apply or direct the application
      of funds or other property on deposit in or credited to any such Deposit Account
      to the repayment of the Obligations, whether or not then due and payable. The
      Lender hereby covenants and agrees that it will not send any such notice to
      a
      financial institution at which any such Deposit Account is maintained directing
      the disposition of funds or other property therein unless and until the
      occurrence of an Event of Default.

    

    (iv) No
      Credit
      Party shall, or shall permit any of its Subsidiaries to, directly or indirectly,
      open, maintain or otherwise have any Deposit Account of any kind whatsoever
      at
      any bank or other financial institution, or any other account where money is
      or
      may be deposited or maintained with any Person, other than the Deposit Accounts
      set forth on Schedule
      6.10.
      The
      closing of any Depositary Account, including without, limitation, any Lockbox
      Account, and the termination of any Depositary Account Agreement or Lockbox
      Account Agreement shall require in each case the prior written consent of
      Lender.

    

    (v) Each
      Credit Party shall have valid and effective Securities Account Agreements in
      place at all times with respect to all of its Securities Accounts while any
      Obligation remains outstanding or, with respect to any Securities Account
      maintained by such Credit Party with a securities intermediary in Canada, at
      the
      Lender’s option, an alternative arrangement satisfactory to the Lender which, in
      the Lender’s judgment, provides equivalent benefits to the Lender under
      applicable Canadian law as the Lender would have as a secured party by virtue
      of
      a Securities Account Agreement under U.S. law. No Securities Accounts shall
      be
      established, used or maintained by any Credit Party unless it complies with
      the
      foregoing.

     

     

    
      
        
        

      

      
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    (vi) All
      amounts received by Lender pursuant to this Section
      6.10
      shall be
      applied as set forth in Section 2.5(a) hereof. So long as no Default or Event of
      Default shall then have occurred and be continuing, any amount not required
      to
      be applied pursuant to the terms specified in Section 2.5(a) shall be promptly
      transferred by Lender to a Deposit Account designated from time to time by
      Borrower (which Deposit Account shall in any event be subject to a Deposit
      Account Agreement).

    

    Section
      6.11 Account
      Verification.
      The
      Lender or its agent may at any time and from time to time send or require any
      Credit Party to send requests for verification of accounts or notices of
      assignment to account debtors and other obligors. The Lender or its agent may
      also at any time and from time to time telephone account debtors and other
      obligors to verify accounts.

     

    Section
      6.12 Compliance
      with Laws.

     

    (a) The
      Borrowers and each Guarantor shall (i) comply with the requirements of
      applicable laws and regulations, the non-compliance with which would materially
      and adversely affect its business or its financial condition and (ii) use
      and keep the Collateral, and require that others use and keep the Collateral,
      only for lawful purposes, without violation of any federal, state or local
      law,
      statute or ordinance.

     

    (b) Without
      limiting the foregoing undertakings, the Borrowers and each Guarantor
      specifically agrees that it will comply with all applicable Environmental Laws
      and obtain and comply with all permits, licenses and similar approvals required
      by any Environmental Laws, and will not generate, use, transport, treat, store
      or dispose of any Hazardous Substances in such a manner as to create any
      material liability or obligation under the common law of any jurisdiction or
      any
      Environmental Law.

     

    (c) The
      Borrowers and each Guarantor shall (i) ensure, and cause each Subsidiary to
      ensure, that no Owner (excluding any Owner of Workstream) shall be listed on
      the
      Specially Designated Nationals and Blocked Person List or other similar lists
      maintained by the Office of Foreign Assets Control (“OFAC”),
      the
      Department of the Treasury or included in any Executive Orders, (ii) not use
      or
      permit the use of the proceeds of any Advance or any other financial
      accommodation from the Lender to violate any of the foreign asset control
      regulations of OFAC or other applicable law, (iii) comply, and cause each
      Subsidiary to comply, with all applicable Bank Secrecy Act laws and regulations,
      as amended from time to time, and (iv) otherwise comply with the USA Patriot
      Act
      as required by federal law and the Lender’s policies and practices.

     

    (d) The
      Borrowers and each Guarantor shall comply with all applicable laws, rules,
      regulations and reporting and informational requirements of the Securities
      and
      Exchange Commission and any applicable securities exchange or trading market
      on
      which its securities are listed or traded.

     

     

    
      
        
        

      

      
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    Section
      6.13 Payment
      of Taxes and Other Claims.
      The
      Borrowers and each Guarantor will pay or discharge, when due, (a) all
      taxes, assessments and governmental charges levied or imposed upon it or upon
      its income or profits, upon any properties belonging to it (including the
      Collateral) or upon or against the creation, perfection or continuance of the
      Security Interest, prior to the date on which penalties attach thereto,
      (b) all federal, state and local taxes required to be withheld by it,
      (c) all lawful claims for labor, materials and supplies which, if unpaid,
      might by law become a Lien upon any of its properties; (d) all rental payments,
      lease payments, utilities expenses, taxes, insurance premiums and other amounts
      owing with respect to the Premises; and (e) each account payable due to a Person
      holding a Permitted Lien (as a result of such payable) on any Collateral;
provided,
      however,
      that
      the Borrowers and the Guarantors shall not be required to pay any such tax,
      assessment, charge, rent, claim or account whose amount, applicability or
      validity is being contested in good faith by appropriate proceedings and for
      which cash reserves in amounts satisfactory to the Lender have been set
      aside.

     

    Section
      6.14 Maintenance
      of Properties.

     

    (a) The
      Borrowers and each Guarantor will keep and maintain the Collateral and all
      of
      its other properties necessary or useful in its business in good condition,
      repair and working order (normal wear and tear excepted) and will from time
      to
      time replace or repair any worn, defective or broken parts; provided,
      however,
      that
      nothing in this Section
      6.14
      shall
      prevent any Credit Party from discontinuing the operation and maintenance of
      any
      of its properties if such discontinuance is, in its good faith judgment,
      desirable in the conduct of the its business and not disadvantageous in any
      material respect to the Lender. The Borrowers and each Guarantor will take
      use
      its best efforts to protect and maintain its Intellectual Property
      Rights.

     

    (b) The
      Borrowers and each Guarantor will defend the Collateral against all Liens,
      claims or demands of all Persons (other than the Lender) claiming the Collateral
      or any interest therein. The Borrowers and each Guarantor will keep all
      Collateral free and clear of all Liens except Permitted Liens. Each Credit
      Party
      will take all commercially reasonable steps necessary to prosecute any Person
      Infringing its Intellectual Property Rights and to defend itself against any
      Person accusing such Credit Party of Infringing any Person’s Intellectual
      Property Rights.

     

    Section
      6.15 Insurance.
      The
      Borrowers and the Guarantors will obtain and at all times maintain insurance
      with insurers acceptable to the Lender, in such amounts, on such terms
      (including any deductibles) and against such risks as may from time to time
      be
      reasonably required by the Lender. Without limiting the generality of the
      foregoing, the Borrowers and the Guarantors will at all times maintain business
      interruption insurance including coverage for force majeure and keep all
      tangible Collateral insured against risks of fire (including so-called extended
      coverage), theft, collision (for Collateral consisting of motor vehicles) and
      such other risks and in such amounts as the Lender may reasonably request,
      with
      any loss payable to the Lender to the extent of its interest, and all policies
      of such insurance shall contain a lender’s loss payable endorsement for the
      Lender’s benefit. All policies of liability insurance required hereunder shall
      name the Lender as an additional insured.

     

    
      
        
        

      

      
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    Section
      6.16 Preservation
      of Existence.
      The
      Borrowers and the Guarantors will preserve and maintain its existence and all
      of
      its rights, privileges and franchises necessary or desirable in the normal
      conduct of its business and shall conduct its business in an orderly, efficient
      and regular manner.

     

    Section
      6.17 Delivery
      of Instruments, etc.
      Upon
      request by the Lender, the Borrowers and each Guarantor will promptly deliver
      to
      the Lender in pledge all instruments, documents and chattel paper constituting
      Collateral, duly endorsed or assigned.

     

    Section
      6.18 Sale
      or Transfer of Assets; Suspension of Business Operations.
      The
      Borrowers and each Guarantor will not sell, lease, assign, transfer or otherwise
      dispose of (a) the stock of any Subsidiary, (b) all or substantially
      all of its assets, or (c) any Collateral or any interest therein (whether
      in one transaction or in a series of transactions) to any other Person other
      than (i) the sale or licensing of Inventory and Intellectual Property Rights
      in
      the ordinary course of business, (ii) the disposition of equipment being
      replaced in the ordinary course of business, or having a book value which is
      less than $10,000 and no longer necessary to the conduct of any Credit Party’s
      business, and (iii) the disposition of Intellectual Property Rights permitted
      by
      the next sentence, and will not liquidate, dissolve or suspend business
      operations. No Credit Party will transfer any part of its ownership interest
      in
      any Intellectual Property Rights and will not permit any agreement under which
      it has licensed Licensed Intellectual Property to lapse, except that such Credit
      Party may transfer such rights or permit such agreements to lapse if it shall
      have reasonably determined that the applicable Intellectual Property Rights
      are
      no longer useful in or are immaterial to its business. If any Credit Party
      transfers any Intellectual Property Rights for value other than in the ordinary
      course of its business, such Credit Party will pay over the proceeds to the
      Lender for application to the Obligations. No Credit Party will license any
      other Person to use any such Credit Party’s Intellectual Property Rights, except
      that they may grant licenses in the ordinary course of its
      business.

     

    Section
      6.19 Consolidation
      and Merger; Asset Acquisitions.
      No
      Credit Party will consolidate with or merge into any Person, or permit any
      other
      Person to merge into it, or acquire (in a transaction analogous in purpose
      or
      effect to a consolidation or merger) all or substantially all the assets of
      any
      other Person.

     

    Section
      6.20 Sale
      and Leaseback.
      No
      Credit Party will enter into any arrangement, directly or indirectly, with
      any
      other Person whereby it shall sell or transfer any real or personal property,
      whether now owned or hereafter acquired, and then or thereafter rent or lease
      as
      lessee such property or any part thereof or any other property which the it
      intends to use for substantially the same purpose or purposes as the property
      being sold or transferred.

     

    Section
      6.21 Restrictions
      on Nature of Business.
      No
      Credit Party will engage in any line of business materially different from
      that
      engaged in as of the Agreement Date and will not purchase, lease or otherwise
      acquire assets not related to its business. Each Credit Party shall preserve
      and
      maintain its separate and distinct identity. Without limiting the generality
      of
      the foregoing, each Credit Party shall (i) maintain an office through which
      its
      business shall be conducted separate and apart from that of any of the other
      Credit Parties or any of their respective Affiliates, (ii) maintain
      separate employees (in sufficient numbers in light of its contemplated
      business operations) and books and accounts from those of any other Credit
      Party
      or any other Person, (iii) except as permitted by this Agreement, not commingle
      funds or assets with those of any other Credit Party or any other Person, (iv)
      conduct its business and hold its assets in its own name, (v) hold itself
      out as an entity separate and distinct from any Affiliate and not as a division,
      department or part of any other Person, and (vi) maintain an arm’s length
      relationship with any Affiliate.

     

    
      
        
        

      

      
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    Section
      6.22 Accounting.
      The
      Borrowers and each Guarantor will not adopt any material change in accounting
      principles other than as required by GAAP. The Borrowers and each Guarantor
      will
      not adopt, permit or consent to any change in their fiscal year, which runs
      from
      June 1 through May 31.

     

    Section
      6.23 Plans.
      Unless
      disclosed to the Lender pursuant to Section 5.12, no Credit Party or ERISA
      Affiliate will (a) adopt, create, assume or become a party to any Pension Plan,
      (b) incur any obligation to contribute to any Multiemployer Plan, (c) incur
      any
      obligation to provide post-retirement medical or insurance benefits with respect
      to employees or former employees (other than benefits required by law) or (d)
      amend any Plan in a manner that would materially increase its funding
      obligations.

     

    Section
      6.24 Place
      of Business; Name.
      No
      Credit Party will transfer its chief executive office or principal place of
      business, or move, relocate, close or sell any business location, in each case
      without at least thirty (30) days’ prior written notice to the Lender and after
      the Lender’s written acknowledgment (which shall not be unreasonably withheld,
      delayed or conditioned) that any reasonable action requested by the Lender
      in
      connection therewith, including to continue the perfection of any Liens in
      favor
      of the Lender in any Collateral, has been completed or taken, and provided
      that
      any such new location shall be in the United States or Canada. No Credit Party
      will permit any tangible Collateral or any records pertaining to the Collateral
      to be located in any state or area in which, in the event of such location,
      a
      financing statement covering such Collateral would be required to be, but has
      not in fact been, filed in order to perfect the Security Interest. No Credit
      Party will change its name, type of organization or jurisdiction of
      organization, in each case without at least thirty (30) days’ prior written
      notice to the Lender and after the Lender’s written acknowledgment (which shall
      not be unreasonably withheld, delayed or conditioned) that any reasonable action
      requested by the Lender in connection therewith, including to continue the
      perfection of any Liens in favor of the Lender in any Collateral, has been
      completed or taken, and provided that any such new location shall be in the
      United States or Canada.

     

    Section
      6.25 Amendments
      to Certain Documents.
      No
      Credit Party will amend any instruments or agreements evidencing any
      Subordinated Debt (if any).

     

    Section
      6.26 Performance
      by the Lender.
      If any
      Credit Party at any time fails to perform or observe any of the foregoing
      covenants contained in this Article VI
      or
      elsewhere herein or in any other Loan Document, and if such failure shall
      continue for a period of ten calendar days after the Lender gives such Credit
      Party written notice thereof (or in the case of the agreements contained in
      Section
      6.9,
      Section
      6.13,
      Section
      6.14(b)
      and
Section
      6.15
      immediately upon the occurrence of any such failure, without notice or lapse
      of
      time), the Lender may, but need not, perform or observe such covenant on behalf
      and in the name, place and stead of such Credit Party (or, at the Lender’s
      option, in the Lender’s name) and may, but need not, take any and all other
      actions which the Lender may reasonably deem necessary to cure or correct such
      failure (including the payment of taxes, the satisfaction of Liens, the payment
      of rent, the performance of obligations owed to account debtors or other
      obligors, the procurement and maintenance of insurance, the execution of
      assignments, security agreements and financing statements, and the endorsement
      of instruments); and the Borrowers shall thereupon pay to the Lender on demand
      the amount of all monies expended and all costs and expenses (including
      reasonable attorneys’ fees and legal expenses) incurred by the Lender in
      connection with or as a result of the performance or observance of such
      agreements or the taking of such action by the Lender, together with interest
      thereon from the date expended or incurred at the Default Rate. To facilitate
      the Lender’s performance or observance of such covenants of the Credit Parties,
      each Credit Party hereby irrevocably appoints the Lender, or the Lender’s
      delegate, acting alone, as such Credit Party’s attorney in fact (which
      appointment is coupled with an interest) with the right (but not the duty)
      from
      time to time to create, prepare, complete, execute, deliver, endorse or file
      in
      the name and on behalf of such Credit Party any and all instruments, documents,
      assignments, security agreements, financing statements, applications for
      insurance and other agreements and writings required to be obtained, executed,
      delivered or endorsed by such Credit Party hereunder or under any other Loan
      Document.

     

    
      
        
        

      

      
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    Article
      VII

     

    EVENTS
      OF DEFAULT, RIGHTS AND REMEDIES

     

    Section
      7.1 Events
      of Default.
      “Event
      of
      Default”, wherever used herein, means any one of the following
      events:

     

    (a) Default
      in the payment of interest when due unless cured within five (5) days after
      the
      due date for payment thereof, or in the payment of any other Obligations when
      they become due and payable;

     

    (b) (i)
      Default in the performance, or breach, of Section
      6.2;
      or (ii)
      any default in the performance, or breach, of any other covenant or agreement
      of
      any Credit Party contained in this Agreement, any Security Document or any
      other
      Loan Document (other than any provision embodied in or covered by any other
      clause of this Section
      7.1,
      including, without limitation, clause (i) of this Section
      7.1(b))
      shall
      occur, which default or breach, if curable, is not cured within thirty (30)
      days; 

     

    (c) A
      Change
      of Control Transaction, a Fundamental Change or a Triggering Event shall
      occur;

     

    (d) Any
      Credit Party shall be or become insolvent, or admit in writing its or his
      inability to pay its or his debts as they mature, or make an assignment for
      the
      benefit of creditors; or any Credit Party shall apply for or consent to the
      appointment of any receiver, trustee, or similar officer for it or him or for
      all or any substantial part of its or his property; or such receiver, trustee
      or
      similar officer shall be appointed without the application or consent of such
      Credit Party; or any Credit Party shall institute (by petition, application,
      answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
      arrangement, readjustment of debt, dissolution, liquidation or similar
      proceeding relating to it or him under the laws of any jurisdiction; or any
      judgment, writ, warrant of attachment or execution or similar process shall
      be
      issued or levied against a substantial part of the property of any Credit Party
      ;

     

    
      
        
        

      

      
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    (e) An
      involuntary petition shall be filed or an action or proceeding otherwise
      commenced seeking reorganization, arrangement, consolidation or readjustment
      of
      the debts of any Credit Party or for any other relief under the United States
      Bankruptcy Code, as amended, or under any other bankruptcy or insolvency act
      or
      law, state or federal, now or hereafter existing;

     

    (f) Any
      representation or warranty made by any Credit Party or any other Person other
      than the Lender in this Agreement, any guaranty or in any other Loan Document,
      or any information provided to the Lender by or on behalf of any Credit Party
      with respect to the Collateral or the financial condition of any Credit Party
      (including, without limitation, any information set forth on any financial
      statement) shall prove to have been incorrect in any material respect when
      such
      representation or warranty is made or deemed to have been made or when such
      information is provided;

     

    (g) The
      rendering against any Credit Party of an arbitration award, final judgment,
      decree or order for the payment of money in excess of $50,000 and the
      continuance of such arbitration award, judgment, decree or order unsatisfied
      and
      in effect for any period of 30 consecutive days without a stay of
      execution;

     

    (h) A
      default
      or event of default under any bond, debenture, note or other evidence of
      material Indebtedness of any Credit Party owed to any Person other than the
      Lender, or under any indenture or other instrument under which any such evidence
      of Indebtedness has been issued or by which it is governed, or under any
      material lease or other contract, and the expiration of the applicable period
      of
      grace, if any, specified in such evidence of Indebtedness, indenture, other
      instrument, lease or contract;

     

    (i) Any
      Reportable Event, which the Lender determines in good faith might constitute
      grounds for the termination of any Pension Plan or for the appointment by the
      appropriate United States District Court of a trustee to administer any Pension
      Plan, shall have occurred and be continuing 30 days after written notice to
      such effect shall have been given to any Credit Party by the Lender; or a
      trustee shall have been appointed by an appropriate United States District
      Court
      to administer any Pension Plan; or the Pension Benefit Guaranty Corporation
      shall have instituted proceedings to terminate any Pension Plan or to appoint
      a
      trustee to administer any Pension Plan; or any Credit Party or any ERISA
      Affiliate shall have filed for a distress termination of any Pension Plan under
      Title IV of ERISA; or any Credit Party or any ERISA Affiliate shall have failed
      to make any quarterly contribution required with respect to any Pension Plan
      under Section 412(m) of the IRC, which the Lender determines in good faith
      may
      by itself, or in combination with any such failures that the Lender may
      determine are likely to occur in the future, result in the imposition of a
      Lien
      on any Credit Party’s assets in favor of the Pension Plan; or any withdrawal,
      partial withdrawal, reorganization or other event occurs with respect to a
      Multiemployer Plan which results or could reasonably be expected to result
      in a
      material liability of any Credit Party to the Multiemployer Plan under Title
      IV
      of ERISA;

     

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    (j) Any
      Credit Party shall liquidate, dissolve, terminate or suspend its business
      operations or otherwise fail to operate its business in the ordinary course,
      merge with another organization; or sell or attempt to sell all or substantially
      all of its assets;

     

    (k) Default
      in the payment of any amount owed by any Credit Party to the Lender other than
      any Debt arising hereunder which default shall continue beyond any applicable
      grace period;

     

    (l) Any
      Guarantor in favor of the Lender shall repudiate, purport to revoke or fail
      to
      perform his or its obligations under the applicable guaranty in favor of the
      Lender, any individual Guarantor shall die or any other Guarantor shall cease
      to
      exist; or

     

    (m) Any
      Credit Party shall take or participate in any action which is prohibited under
      the provisions of any Subordination Agreement or make any payment on the
      Subordinated Debt that is not permitted under the provisions of the applicable
      Subordination Agreement.

     

    Section
      7.2 Rights
      and Remedies.
      During
      any Default Period, the Lender may exercise any or all of the following rights
      and remedies:

     

    (a) The
      Lender may declare the Commitment to be terminated, whereupon the same shall
      forthwith terminate;

     

    (b) The
      Lender may declare the Obligations to be forthwith due and payable, whereupon
      all Obligations shall become and be forthwith due and payable, without
      presentment, notice of dishonor, protest or further notice of any kind, all
      of
      which the Credit Parties hereby expressly waive;

     

    (c) The
      Lender may, without notice to the Credit Parties and without further action,
      apply any and all money owing by the Lender to any Credit Party to the payment
      of the Obligations;

     

    (d) The
      Lender may exercise and enforce any and all rights and remedies available upon
      default to a secured party under the UCC or the PPSA, as applicable, including
      the right to take possession of Collateral, or any evidence thereof, proceeding
      without judicial process or by judicial process (without a prior hearing or
      notice thereof, which the Credit Parties hereby expressly waive), the right
      to
      notify account debtors to pay the Lender directly (and the Credit Parties shall
      join in any such notice if the Lender so requests), and the right to sell,
      lease
      or otherwise dispose of any or all of the Collateral at public or private sale
      (with or without giving any warranties as to the Collateral, title to the
      Collateral or similar warranties), and, in connection therewith, the Credit
      Parties will on demand assemble the Collateral and make it available to the
      Lender at a place to be designated by the Lender which is reasonably convenient
      to both parties;

     

    (e) The
      Lender may exercise and enforce its rights and remedies under the other Loan
      Documents;

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    (f) The
      Lender may draw on any letter of credit of which the Lender is the beneficiary
      as security for the Advances and/or any other Obligations and/or apply any
      cash
      Collateral to the Obligations; and

     

    (g) The
      Lender may exercise any other rights and remedies available to it by law or
      agreement.

     

    Notwithstanding
      the foregoing, upon the occurrence of an Event of Default described in
Section
      7.1(d)
      or
Section
      7.1(e),
      the
      Obligations shall be immediately due and payable automatically without
      presentment, demand, protest or notice of any kind. If the Lender sells any
      of
      the Collateral on credit, the Obligations will be reduced only to the extent
      of
      payments actually received. If the purchaser fails to pay for the Collateral,
      the Lender may resell the Collateral and shall apply any proceeds actually
      received to the Obligations.

     

    Section
      7.3 Certain
      Notices.
      If
      notice to any Credit Party of any intended disposition of Collateral or any
      other intended action is required by law in a particular instance, such notice
      shall be deemed commercially reasonable if given (in the manner specified in
      Section
      8.3)
      at
      least ten calendar days before the date of intended disposition or other
      action.

     

    Article
      VIII

     

    MISCELLANEOUS

     

    Section
      8.1 No
      Waiver; Cumulative Remedies; Compliance with Laws.
      No
      failure or delay by the Lender in exercising any right, power or remedy under
      the Loan Documents shall operate as a waiver thereof, nor shall any single
      or
      partial exercise of any such right, power or remedy preclude any other or
      further exercise thereof or the exercise of any other right, power or remedy
      under the Loan Documents. The remedies provided in the Loan Documents are
      cumulative and not exclusive of any remedies provided by law. The Lender may
      comply with any applicable state, provincial, federal or foreign law
      requirements in connection with a disposition of the Collateral and such
      compliance will not be considered adversely to affect the commercial
      reasonableness of any sale of the Collateral.

     

    Section
      8.2 Amendments,
      etc.
      No
      amendment, modification, termination or waiver of any provision of any Loan
      Document or consent to any departure by any Credit Party therefrom or any
      release of a Security Interest shall be effective unless the same shall be
      in
      writing and signed by the Lender, and then such waiver or consent shall be
      effective only in the specific instance and for the specific purpose for which
      given. No notice to or demand on any Credit Party in any case shall entitle
      any
      Credit Party to any other or further notice or demand in similar or other
      circumstances.

    

      Section
        8.3 Notices;
        Communication of Confidential Information; Requests for
        Accounting Except
        as otherwise expressly provided herein, all notices, requests, demands and
        other
        communications provided for under the Loan Documents shall be in writing
        and
        shall be (a) personally delivered, (b) sent by registered or certified
        first class United States mail, return receipt requested, (c) sent by
        overnight courier of national reputation, or (d) transmitted by facsimile,
        in each case delivered or sent to the party to whom notice is being given
        to the
        business address or facsimile number set forth below or, as to each party,
        at
        such other business address or facsimile number as it may hereafter designate
        in
        writing to the other party pursuant to the terms of this Section
        8.3.
        All
        such notices, requests, demands and other communications shall be deemed
        to be
        an authenticated record communicated or given on (d) the date received if
        personally delivered, (e) two days after being deposited in the mail if
        delivered by mail, (f) the date delivered if delivered by overnight
        courier, or (g) the date of transmission if sent by facsimile. All notices,
        financial information, or other business records sent by either party to
        this
        Agreement may be transmitted, sent, or otherwise communicated via such medium
        as
        the sending party may deem appropriate and commercially reasonable. Notices
        shall be sent in accordance with the following information unless changed
        by
        written notice hereunder:

      

    

    
      	
              If
                to any Credit Party: 

            	 	Workstream Inc.
	 	 	495
              March Road
	 	 	Ottawa,
              Ontario, Canada K2K-3G1
	 	 	Telephone:
              613-270-0619
	 	 	Facsimile:
              613-236-9819
	 	 	Attention:
              CEO

    

    
       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

    

     

    
      	If to the Lender:	 	Hilco Financial, LLC
	 	 	5
              Revere Drive, Suite 206
	 	 	Northbrook,
              Illinois 60062
	 	 	Telephone:
              847-509-1100
	 	 	Facsimile:
              847-509-1150
	 	 	Attention:
              CEO  
	 	 	 
	 With a copy to:	 	Katten Muchin Rosenman LLP
	 	 	525
              West Monroe Street
	 	 	Chicago,
              Illinois 60661
	 	 	Facsimile:
              (312) 577-8778
	 	 	Attention:
              Denise S. Burn, Esq.

    

     

    Section
      8.4 Further
      Documents.
      The
      Borrowers and each Guarantor will from time to time execute, deliver, endorse
      and authorize the filing of any and all instruments, documents, conveyances,
      assignments, security agreements, financing statements, control agreements
      and
      other agreements and writings that the Lender may reasonably request in order
      to
      secure, protect, perfect or enforce the Security Interest or the Lender’s rights
      under the Loan Documents (but any failure to request or assure that the
      Borrowers or any Guarantor executes, delivers, endorses or authorizes the filing
      of any such item shall not affect or impair the validity, sufficiency or
      enforceability of the Loan Documents and the Security Interest, regardless
      of
      whether any such item was or was not executed, delivered or endorsed in a
      similar context or on a prior occasion). Simultaneously herewith, the Credit
      Parties shall execute and deliver to the Lender the so-called “Pre-filing
      Letter” and if requested as soon as practicable hereafter the Patent, Trademark
      and Copyright Security Agreement. In addition, the disclosure letter described
      above shall update and contain all schedules referred to in this Agreement,
      whether or not in Article V, or any other Transaction Document (as defined
      in
      the Transaction Agreement) or Loan Document.

     

    
      
        
        

      

      
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    Section
      8.5 Costs
      and Expenses.
      The
      Borrowers shall pay on demand all costs and expenses, including reasonable
      attorneys’ fees, bank wire fees and lockbox fees, incurred by the Lender in
      connection with the negotiation, preparation and execution of the Loan Documents
      (which costs are included in the sum payable pursuant to Section 4(f) of the
      Transaction Agreement), the amendment, collection and enforcement of the Loan
      Documents and the Obligations, and the creation, perfection, protection,
      satisfaction, foreclosure or enforcement of the Security Interest (other than
      such creation and perfection in connection with the Closing, the costs and
      expenses of which also are included in the sum payable under Section 4(f) of
      the
      Transaction Agreement).

     

    Section
      8.6 Indemnity.
      In
      addition to the payment of expenses pursuant to Section
      8.5,
      the
      Borrowers shall indemnify, defend and hold harmless the Lender, and any of
      its
      participants, parent corporations, subsidiary corporations, affiliated
      corporations, successor corporations, and all present and future officers,
      directors, employees, attorneys and agents of the foregoing (the “Indemnitees”)
      from
      and against any of the following (collectively, “Indemnified
      Liabilities”):

     

    (a) Any
      and
      all transfer taxes, documentary taxes, assessments or charges made by any
      governmental authority by reason of the execution and delivery of the Loan
      Documents or the making of the Advances;

     

    (b) Any
      claims, loss or damage to which any Indemnitee may be subjected if any
      representation or warranty contained in Section
      5.14
      proves
      to be incorrect in any respect or as a result of any violation of the covenant
      contained in Section
      6.12(b);
      and

     

    (c) Any
      and
      all other liabilities, losses, damages, penalties, judgments, suits, claims,
      costs and expenses of any kind or nature whatsoever (including the reasonable
      fees and disbursements of counsel) in connection with the foregoing and any
      other investigative, administrative or judicial proceedings, whether or not
      such
      Indemnitee shall be designated a party thereto, which may be imposed on,
      incurred by or asserted against any such Indemnitee, in any manner related
      to or
      arising out of or in connection with the making of the Advances and the Loan
      Documents or the use or intended use of the proceeds of the
      Advances.

     

    If
      any
      investigative, judicial or administrative proceeding arising from any of the
      foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the
      Borrowers, or counsel designated by the Borrowers and satisfactory to the
      Indemnitee, will resist and defend such action, suit or proceeding to the extent
      and in the manner directed by the Indemnitee, at the Borrowers’ sole costs and
      expense. Each Indemnitee will use reasonable efforts to cooperate in the defense
      of any such action, suit or proceeding. If the foregoing undertaking to
      indemnify, defend and hold harmless may be held to be unenforceable because
      it
      violates any law or public policy, the Borrowers shall nevertheless make the
      maximum contribution to the payment and satisfaction of each of the Indemnified
      Liabilities which is permissible under applicable law. The Borrowers’ obligation
      under this Section
      8.6
      shall
      survive the termination of this Agreement and the discharge of the Borrowers’
other obligations hereunder.

     

    Section
      8.7 Participants.
      The
      Lender and its participants, if any, are not partners or joint venturers, and
      the Lender shall not have any liability or responsibility for any obligation,
      act or omission of any of its participants. All rights and powers specifically
      conferred upon the Lender may be transferred or delegated to any of the Lender’s
      participants, successors or assigns.

     

    
      
        
        

      

      
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    Section
      8.8 Execution
      in Counterparts; Facsimile Execution.
      This
      Agreement and other Loan Documents may be executed in any number of
      counterparts, each of which when so executed and delivered shall be deemed
      to be
      an original and all of which counterparts, taken together, shall constitute
      but
      one and the same instrument. Delivery of an executed counterpart of this
      Agreement or any other Loan Document by facsimile shall be equally as effective
      as delivery of an original executed counterpart of this Agreement or such other
      Loan Document. Any party delivering an executed counterpart of this Agreement
      or
      any other Loan Document by facsimile also shall deliver an original executed
      counterpart of this Agreement or such other Loan Document but the failure to
      deliver an original executed counterpart shall not affect the validity,
      enforceability, and binding effect of this Agreement or such other Loan
      Document. To the fullest extent permitted by applicable law, each Credit Party
      waives notice of the Lender’s acceptance of this Agreement and the other Loan
      Documents.

     

    Section
      8.9 Retention
      of Credit Parties’ Records.
      The
      Lender shall have no obligation to maintain any electronic records or any
      documents, schedules, invoices, agings, or other papers delivered to the Lender
      by any Credit Party or in connection with the Loan Documents for more than
      10
      days after receipt by the Lender. If there is a special need to retain specific
      records, the applicable Credit Party must inform the Lender of its need to
      retain those records with particularity, which must be delivered in accordance
      with the notice provisions of Section
      8.3
      within
      10 days of the Lender taking control of same.

     

    Section
      8.10 Binding
      Effect; Assignment; Complete Agreement.

     

    (a) The
      Loan
      Documents shall be binding upon and inure to the benefit of the Credit Parties
      and the Lender and their respective successors and assigns, except that no
      Credit Party shall have the right to assign its rights hereunder or thereunder
      or any interest herein or therein without the Lender’s prior written
      consent.

     

    (b) This
      Agreement, together with the Loan Documents, comprises the complete and
      integrated agreement of the parties on the subject matter hereof and supersedes
      all prior agreements, written or oral, on the subject matter hereof. To the
      extent that any provision of this Agreement contradicts other provisions of
      the
      Loan Documents, this Agreement shall control.

     

    Section
      8.11 Severability
      of Provisions.
      Any
      provision of this Agreement which is prohibited or unenforceable shall be
      ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining provisions hereof.

     

    Section
      8.12 Headings.
      Article, Section and subsection headings in this Agreement are included herein
      for convenience of reference only and shall not constitute a part of this
      Agreement for any other purpose.

     

    Section
      8.13 Governing
      Law; Jurisdiction, Venue.
      The Loan
      Documents shall be governed by and construed in accordance with the substantive
      laws (other than conflict of law provisions and principles) of the State of
      Illinois. Each Credit Party hereby consents to the non-exclusive jurisdiction
      of
      any United States Federal Court sitting in or with direct or indirect
      jurisdiction over the Northern District of Illinois or any Illinois state court
      sitting in Cook County, Chicago, Illinois in any action, suit or other
      proceeding arising out of or relating to this Agreement or any of the other
      Loan
      Documents, and each Credit Party irrevocably agrees that all claims and demands
      in respect of any such action, suit or proceeding may be heard and determined
      in
      any such court and irrevocably waives any objection it may now or hereafter
      have
      as to the venue of any such action, suit or proceeding brought in any such
      court
      or that such court is an inconvenient forum. Each Credit Party waives personal
      service of any and all process upon it and consents that all such service of
      process may be made by registered mail (return receipt requested) directed
      to
      such Credit Party at such Credit Party’s address for notices pursuant to this
      Agreement, and service so made shall be deemed to be completed five (5) days
      after the same shall have been so deposited in the United States mails. Nothing
      herein shall limit the right of the Lender to bring proceedings against any
      Credit Party or any of its Affiliates in the courts of any other jurisdiction.
      Any judicial proceeding commenced by any Credit Party against the Lender or
      any
      other holder of any Obligations, or any Affiliate of the Lender or any other
      holder of any Obligations, involving, directly or indirectly, any matter in
      any
      way arising out of, related to or connected with any Loan Document shall be
      brought only in a United States Federal Court sitting in or with direct
      jurisdiction over the Northern District of Illinois or any Illinois state court
      sitting in Cook County, Chicago, Illinois. Nothing in this Agreement shall
      be
      deemed or operate to affect the right of the Lender to serve legal process
      in
      any other manner permitted by law or to preclude the enforcement by the Lender
      of any judgment or order obtained in such forum or the taking of any action
      under this Agreement to enforce same in any other appropriate forum or
      jurisdiction.

     

    
      
        
        

      

      
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    Section
      8.14 Waiver
      of Jury Trial.
      TO
      THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH CREDIT PARTY AND THE LENDER
      HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY
      ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
      OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
      DOCUMENT, THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
      THEREBY OR EITHER PARTY’S ACTIONS IN THE NEGOTIATION, ADMINISTRATION, OR
      ENFORCEMENT HEREOF OR THEREOF. EACH CREDIT PARTY AND THE LENDER ACKNOWLEDGES
      THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE
      OF
      THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL
      OF ITS CHOOSING.

     

    Article
      IX

     

    CROSS-GUARANTY

     

    Section
      9.1 Cross-Guaranty. Each
      Borrower hereby agrees that such Borrower is jointly and severally liable for,
      and hereby absolutely and unconditionally guarantees to the Lender and its
      successors and assigns, the full and prompt payment (whether at stated maturity,
      by acceleration or otherwise) and performance of, all Obligations owed or
      hereafter owing to the Lender by each other Borrower. Each Borrower agrees
      that
      its guaranty obligation hereunder is a continuing guaranty of payment and
      performance and not of collection, that its obligations under this Section 9
      shall
      not be discharged until payment and performance, in full, of the Obligations
      has
      occurred, and that its obligations under this Section
      9
      shall be
      absolute and unconditional, irrespective of, and unaffected by, 

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    (a) the
      genuineness, validity, regularity, enforceability or any future amendment of,
      or
      change in, this Agreement, any other Loan Document or any other agreement,
      document or instrument to which any Borrower is or may become a
      party;

     

    (b) the
      absence of any action to enforce this Agreement (including this Section
      9)
      or any
      other Loan Document or the waiver or consent by the Lender with respect to
      any
      of the provisions thereof;

     

    (c) the
      existence, value or condition of, or failure to perfect or delay in perfecting
      its Lien against, any security for the Obligations or any action, or the absence
      of any action, by the Lender in respect thereof (including the release of any
      such security); 

     

    (d) the
      insolvency of any Credit Party; or

     

    (e) any
      other
      action or circumstances that might otherwise constitute a legal or equitable
      discharge or defense of a surety or guarantor.

     

    Each
      Borrower shall be regarded, and shall be in the same position, as principal
      debtor with respect to the Obligations guaranteed hereunder.

    

    Section
      9.2 Waivers
      by Borrowers. Each
      Borrower expressly waives all rights it may have now or in the future under
      any
      statute, or at common law, or at law or in equity, or otherwise, to compel
      the
      Lender to marshal assets or to proceed in respect of the Obligations guaranteed
      hereunder against any other Credit Party, any other party or against any
      security for the payment and performance of the Obligations before proceeding
      against, or as a condition to proceeding against, such Borrower. It is agreed
      between each Borrower and the Lender that the foregoing waivers are of the
      essence of
      the
      transaction contemplated by this Agreement and the other Loan Documents and
      that, but for the provisions of this Section
      9
      and such
      waivers, the Lender would decline to enter into this Agreement.

     

    Section
      9.3 Benefit
      of Guaranty. Each
      Borrower agrees that the provisions of this Section 9 are for the benefit of
      the
      Lender and its successors, transferees, endorsees and assigns, and nothing
      herein contained shall impair, as between any other Borrower and the Lender,
      the
      obligations of such other Borrower under the Loan Documents.

     

    Section
      9.4 Waiver
      of Subrogation, Etc. Notwithstanding
      anything to the contrary in this Agreement or in any other Loan Document, and
      except as set forth in Section 9.7, each Borrower hereby expressly and
      irrevocably waives any and all rights at law or in equity to subrogation,
      reimbursement, exoneration, contribution, indemnification or set off and any
      and
      all defenses available to a surety, guarantor or accommodation co-obligor.
      Each
      Borrower acknowledges and agrees that this waiver is intended to benefit the
      Lender and shall not limit or otherwise affect such Borrower’s liability
      hereunder or the enforceability of this Section 9,
      and
      that the Lender and its successors and assigns are intended third party
      beneficiaries of the waivers and agreements set forth in this Section
      9.4.

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

     

    Section
      9.5 Election
      of Remedies. If
      the
      Lender may, under applicable law, proceed to realize its benefits under any
      of
      the Loan Documents giving the Lender a Lien upon any Collateral, whether owned
      by any Borrower or by any other Person, either by judicial foreclosure or by
      non-judicial sale or enforcement, the Lender may, at its sole option, determine
      which of its remedies or rights it may pursue without affecting any of its
      rights and remedies under this Section 9. If, in the exercise of any of its
      rights and remedies, the Lender shall forfeit any of its rights or remedies,
      including its right to enter a deficiency judgment against any Borrower or
      any
      other Person, whether because of any applicable laws pertaining to “election of
      remedies” or the like, each Borrower hereby consents to such action by the
      Lender and waives any claim based upon such action, even if such action by
      the
      Lender shall result in a full or partial loss of any rights of subrogation
      that
      each Borrower might otherwise have had but for such action by the Lender. Any
      election of remedies that results in the denial or impairment of the right
      of
      the Lender to seek a deficiency judgment against any Borrower shall not impair
      any other Borrower’s obligation to pay the full amount of the Obligations. In
      the event the Lender shall bid at any foreclosure or trustee’s sale or at any
      private sale permitted by law or the Loan Documents, the Lender may bid all
      or
      less than the amount of the Obligations and the amount of such bid need not
      be
      paid by the Lender but shall be credited against the Obligations. The amount
      of
      the successful bid at any such sale, whether the Lender or any other party
      is
      the successful bidder, shall be conclusively deemed to be the fair market value
      of the Collateral and the difference between such bid amount and the remaining
      balance of the Obligations shall be
      conclusively deemed to be the amount of the Obligations guaranteed under this
      Section 9, notwithstanding that any present or future law or court decision
      or
      ruling may have the effect of reducing the amount of any deficiency claim to
      which the Lender might otherwise be entitled but for such bidding at any such
      sale.

     

    Section
      9.6 Limitation. Notwithstanding
      any provision herein contained to the contrary, each Borrower’s liability under
      this Section 9 (which liability is in any event in addition to amounts for
      which
      such Borrower is primarily liable under Article
      II)
      shall
      be limited to an amount not to exceed as of any date of determination the
      greater of:

     

    (a) the
      net
      amount of all Advances advanced to any other Borrower under this Agreement
      and
      then re-loaned or otherwise transferred to, or for the benefit of, such
      Borrower; and

     

    (b) the
      amount that could be claimed by the Lender from such Borrower under this
Section
      9
      without
      rendering such claim voidable or avoidable under Section 548 of Chapter 11
      of
      the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
      Act, Uniform Fraudulent Conveyance Act or similar statute or common law after
      taking into account, among other things, such Borrower’s right of contribution
      and indemnification from each other Borrower under Section
      9.7.

     

    Section
      9.7 Contribution
      with Respect to Guaranty Obligations. 

     

    (a) To
      the
      extent that any Borrower shall make a payment under this Section
      9
      of all
      or any of the Obligations (other than Advances made to that Borrower for which
      it is primarily liable) (a “Guarantor
      Payment”)
      that,
      taking into account all other Guarantor Payments then previously or concurrently
      made by any other Borrower, exceeds the amount that such Borrower would
      otherwise have paid if each Borrower had paid the aggregate Obligations
      satisfied by such Guarantor Payment in the same proportion that such Borrower’s
“Allocable Amount” (as defined below) (as determined immediately prior to such
      Guarantor Payment) bore to the aggregate Allocable Amounts of each of the
      Borrowers as determined immediately prior to the making of such Guarantor
      Payment, then, following the Termination Date, such Borrower shall be entitled
      to receive contribution and indemnification payments from, and be reimbursed
      by,
      each other Borrower for the amount of such excess, pro rata based upon their
      respective Allocable Amounts in effect immediately prior to such Guarantor
      Payment.

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

     

    (b) As
      of any
      date of determination, the “Allocable
      Amount”
of
      any
      Borrower shall be equal to the maximum amount of the claim that could then
      be
      recovered from such Borrower under this Section
      9
      without
      rendering such claim voidable or avoidable under Section 548 of Chapter 11
      of
      the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
      Act, Uniform Fraudulent Conveyance Act or similar statute or common
      law.

     

    (c) This
      Section
      9.7
      is
      intended only to define the relative rights of Borrowers and nothing set forth
      in this Section
      9.7
      is
      intended to or shall impair the obligations of Borrowers, jointly and severally,
      to pay any amounts as and when the same shall become due and payable in
      accordance with the terms of this Agreement, including Section
      9.1.
      Nothing
      contained in Section
      9.10
      shall
      limit the liability of any Borrower to pay the Advances made directly or
      indirectly to that Borrower and accrued interest, fees and expenses with respect
      thereto for which such Borrower shall be primarily liable.

     

    (d) The
      parties hereto acknowledge that the rights of contribution and indemnification
      hereunder shall constitute assets of the Borrower to which such contribution
      and
      indemnification is owing.

     

    (e) The
      rights of the indemnifying Borrowers against other Credit Parties under this
      Section
      9.7
      shall be
      exercisable from and after the Termination Date.

     

    Section
      9.8 Liability
      Cumulative. The
      liability of Borrowers under this Section 9 is in addition to and shall be
      cumulative with all liabilities of each Borrower to the Lender under this
      Agreement and the other Loan Documents to which such Borrower is a party or
      in
      respect of any Obligations or obligation of the other Borrowers, without any
      limitation as to amount, unless the instrument or agreement evidencing or
      creating such other liability specifically provides to the
      contrary.

     

    -
      Remainder of Page Intentionally Blank-

    [Signature
      Pages Follow]

    
      
        
        

      

      
        55

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Loan and Security Agreement
      to be executed by their respective officers thereunto duly authorized as of
      the
      date first above written.

    
      	 	 	 
	 	
              BORROWERS:

               

              WORKSTREAM USA, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              Mullarkey
	 	
              
                

              

              Name: Michael
                Mullarkey

              Title:
                President
                and Chief Executive Officer 

            

    

    

    
      	 	 	 
	 	PAULA ALLEN HOLDINGS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              Mullarkey
	 	
              

              Name:
                Michael
                Mullarkey   

              Title:
                President
                and Chief Executive Officer 

            

    

     

    
      	 	 	 
	 	THE
              OMNI
              PARTNERS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              Mullarkey
	 	
              

              Name:
                Michael
                Mullarkey   

              Title:
                President
                and Chief Executive Officer

            

    

     

    
      	 	 	 
	 	6FIGUREJOBS.COM,
              INC.
              
	 
 	 
 	 
 
	 	By:  	/s/ Michael
              Mullarkey
	 	
              

              Name:
                Michael
                Mullarkey   

              Title:
                President
                and Chief Executive Officer

            

    

    

      	 	 	 
	 	
              GUARANTOR:

               

              WORKSTREAM INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Steve
              Lerch
	 	
              

              Name:
                Steve
                Lerch    

              Title: Chief
                Financial Officer

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              LENDER:

              

              HILCO
                FINANCIAL, LLC

            
	 
 	 
 	 
 
	 	By:  	/s/ David
              B. Chisholm
	 	
              

              Name:
                David
                B. Chisholm   

              Title: Chief
                Executive Officer

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