Document:

Exhibit
      10.2

     

    [FORM
      OF SENIOR SECURED NOTE]

     

    NOTWITHSTANDING
      ANYTHING CONTAINED IN THIS NOTE TO THE CONTRARY, THIS NOTE MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
      ARRANGEMENT SECURED BY THIS NOTE. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY
      REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTION 13(a)
      HEREOF.

     

    Workstream
      Inc.

     

    Senior
      Secured Note

     

    
      	
              Issuance
                Date: August 29, 2008

            	
              Original
                Principal Amount: U.S. $

            

    

    

    FOR
      VALUE RECEIVED,
      Workstream Inc., a
      corporation existing pursuant to the Canada Business Corporations Act
(the
      “Company”),
      hereby promises to pay to the order of __________________________ or its
      registered assigns (“Holder”)
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
“Principal”)
      when
      due, whether upon the Maturity Date (as defined below), acceleration, redemption
      or otherwise (in each case in accordance with the terms hereof) and to pay
      interest (“Interest”)
      on any
      outstanding Principal at the applicable Interest Rate from the date set out
      above as the Issuance Date (the “Issuance Date”)
      until
      the same becomes due and payable, whether upon the Maturity Date or
      acceleration, redemption or otherwise (in each case in accordance with the
      terms
      hereof). This Senior Secured Note (including all Senior Secured Notes issued
      in
      exchange, transfer or replacement hereof, is referred to herein as the
“Note”)
      is
      being issued pursuant to the Exchange Agreement (as defined below) on the
      Closing Date (as defined below). Certain capitalized terms used herein are
      defined in Section 23.

     

    1. MATURITY.
      On the
      Maturity Date, the Company shall pay to the Holder an amount in cash
      representing all then-outstanding Principal, accrued and unpaid Interest and
      accrued and unpaid Late Charges, if any. Other than as specifically permitted
      by
      this Note, the Company may not prepay any portion of the outstanding Principal,
      accrued and unpaid Interest or accrued and unpaid Late Charges on Principal
      and
      Interest, if any.
      The
      Holder and the Company shall maintain records showing the Principal, Interest
      and Late Charges redeemed and/or paid (as the case may be) and the dates of
      such
      redemption and/or payments (as the case may be) or shall use such other method,
      reasonably satisfactory to the Holder and the Company, so as not to require
      physical surrender of this Note upon partial redemption or payment.

     

    2. INTEREST;
      INTEREST RATE.
      Interest on this Note shall commence accruing on the Issuance Date, shall accrue
      daily at the Interest Rate on the outstanding Principal amount from time to
      time, shall be computed on the basis of a 360-day year comprised of twelve
      (12)
      thirty (30) day months and shall be paid on the Maturity Date to the record
      holder of this Note in cash. From and after the occurrence and during the
      continuance of any Event of Default, the Interest Rate then in effect shall
      be
      increased by five percent (5%). In the event that such Event of Default is
      subsequently cured, the increase referred to in the preceding sentence shall
      cease to be effective as of the date of such cure; provided that the Interest
      as
      calculated and unpaid at such increased rate during the continuance of such
      Event of Default shall continue to apply to the extent relating to the days
      after the occurrence of such Event of Default through and including the date
      of
      such cure of such Event of Default.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3. RIGHTS
      UPON EVENT OF DEFAULT.

     

    (a) Event
      of Default.
      Each of
      the following events shall constitute an “Event
      of Default”:

     

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

     

    (ii) the
      delisting or suspension of the Common Shares from an Eligible Market, provided
      that immediately following such delisting or suspension the Common Shares would
      not be listed on a designated exchange for purposes of the Income Tax Act
      (Canada);

     

    (iii) the
      Company’s failure to deliver the required number of Common Shares within seven
      (7) Trading Days after the applicable exercise date under the Holder’s 2008
      Warrant or (B) notice, written or oral, to the Holder, including, without
      limitation, by way of public announcement or through any of its agents, at
      any
      time, of its intention not to comply, as required, with a request for an
      exercise of any portion of the Holder’s 2008 Warrant that is requested in
      accordance with the provisions thereof;

     

    (iv) the
      Company’s or any Subsidiary’s (as defined below) failure to pay to the Holder
      any amount of Principal, Interest, Late Charges or other amounts when and as
      due
      under this Note (including, without limitation, the Company’s or any
      Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any
      other Transaction Document, except, in the case of a failure to pay Interest
      and
      Late Charges when and as due, in which case only if such failure remains uncured
      for a period of at least seven (7) days;

     

    (v) the
      Company fails to remove any restrictive legend on any certificate or any Common
      Shares issued to the Holder upon exercise of any Securities acquired by the
      Holder under the Exchange Agreement as and when required by such Securities,
      the
      Transaction Agreement, the Exchange Agreement or the Amended Registration Rights
      Agreement (as the case may be), and any such failure continues uncured for
      at
      least ten (10) days;

     

    (vi) any
      Event
      of Default (as defined in the Other Notes) occurs with respect to any Other
      Note;

     

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

     

    
      
         

      

      
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    (viii) any
      breach or failure in any respect by the Company or any Subsidiary to comply
      with
      any provision of Section 9
      of this
      Note;

     

    (ix) the
      occurrence of any default under, redemption of or acceleration prior to maturity
      of any Indebtedness (as defined in the Exchange Agreement) of the Company or
      any
      of its Subsidiaries, other than with respect to any Other Notes;

     

    (x) any
      Material Adverse Effect (as defined in the Exchange Agreement)
      occurs;

     

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

     

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

     

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

     

    
      
         

      

      
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    (xiv) a
      final
      judgment or judgments for the payment of money aggregating in excess of
      $2,000,000 are rendered against the Company or any of its Subsidiaries, which
      judgments are not, within thirty (30) days after the entry thereof, bonded,
      discharged or stayed pending appeal, or are not discharged within thirty (30)
      days after the expiration of such stay; provided, however, that any judgment
      which is covered by insurance or an indemnity from a credit worthy party shall
      not be included in calculating the $2,000,000 amount set forth above so long
      as
      the Company provides the Holder a written statement from such insurer or
      indemnity provider (which written statement shall be reasonably satisfactory
      to
      the Holder) to the effect that such judgment is covered by insurance or an
      indemnity and the Company or such Subsidiary (as the case may be) will receive
      the proceeds of such insurance or indemnity within 30 days of the issuance
      of
      such judgment;
      or

     

    (xv) the
      Company or any Subsidiary either (i) fails to pay, when due, or within any
      applicable grace period, any payment with respect to any Indebtedness in excess
      of $250,000 due to any third party, other than, with respect to unsecured
      Indebtedness only, payments contested by the Company or such Subsidiary (as
      the
      case may be) in good faith by proper proceedings and with respect to which
      adequate reserves have been set aside for the payment thereof in accordance
      with
      GAAP (as defined below), or otherwise be in breach or violation of any agreement
      for monies owed or owing in an amount in excess of $250,000, which breach or
      violation permits the other party thereto to declare a default or otherwise
      accelerate amounts due thereunder, or (ii) suffer to exist any other
      circumstance or event that would, with or without the passage of time or the
      giving of notice, result in a default or event of default under any agreement
      binding the Company or any Subsidiary, which default or event of default would
      or is likely to have a material adverse effect on the business, assets,
      operations (including results thereof), liabilities, properties, condition
      (including financial condition) or prospects of the Company or any of its
      Subsidiaries, individually or in the aggregate.

     

    (b) Redemption
      Right.
      Upon
      the occurrence of an Event of Default under this Note or any Other Note, the
      Company shall within one (1) Business Day deliver written notice thereof via
      facsimile and overnight courier (with next day delivery specified) (an
“Event
      of Default Notice”)
      to the
      Holder. At any time after the earlier of the Holder’s receipt of an Event of
      Default Notice and the Holder becoming aware of an Event of Default, the Holder
      may require the Company (regardless of whether such Event of Default has been
      cured) to redeem all or any portion of this Note by delivering written notice
      thereof (the “Event
      of Default Redemption Notice”)
      to the
      Company, which Event of Default Redemption Notice shall indicate the portion
      of
      this Note the Holder is electing to redeem. Each portion of this Note subject
      to
      redemption by the Company pursuant to this Section 3(b)
      shall be
      redeemed by the Company at a price equal to the product of (i) the sum of the
      portion of the Principal amount of this Note so elected by the Holder to be
      redeemed together with accrued and unpaid Interest with respect to such portion
      and accrued and unpaid Late Charges with respect to such portion and Interest
      as
      of such time as the Holder delivers an Event of Default Redemption Notice
      multiplied by (ii) the Redemption Premium (the “Event
      of Default Redemption
      Price”).
      Redemptions required by this Section 3(b)
      shall be
      made in accordance with the provisions of Section 7.
      To the
      extent redemptions required by this Section 3(b)
      are
      deemed or determined by a court of competent jurisdiction to be prepayments
      of
      this Note by the Company, such redemptions shall be deemed to be voluntary
      prepayments. The Company agrees that in the event of the Company’s redemption of
      any portion of this Note under this Section 3(b),
      the
      Holder’s damages would be uncertain and difficult to estimate because of the
      parties’ inability to predict future interest rates and the uncertainty of the
      availability of a suitable substitute investment opportunity for the Holder.
      Accordingly, any redemption premium due under this Section 3(b)
      is
      intended by the parties to be, and shall be deemed, a reasonable estimate of
      the
      Holder’s actual loss of its investment opportunity and not as a
      penalty.

     

    
      
         

      

      
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    4. RIGHTS
      UPON FUNDAMENTAL TRANSACTION.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      the
      Successor Entity assumes in writing all of the obligations of the Company under
      this Note and the other Transaction Documents in accordance with the provisions
      of this Section 4
      pursuant
      to written agreements in form and substance reasonably satisfactory to the
      Holder and approved by the Holder prior to such Fundamental Transaction,
      including agreements to deliver to each holder of Notes in exchange for such
      Notes a security of the Successor Entity evidenced by a written instrument
      substantially similar in form and substance to the Notes, including, without
      limitation, having a principal amount and interest rate equal to the principal
      amounts then outstanding and the interest rates of the Notes held by such holder
      and having similar ranking to the Notes, and reasonably satisfactory to the
      Holder. Upon the occurrence of any Fundamental Transaction, the Successor Entity
      shall succeed to, and be substituted for (so that from and after the date of
      such Fundamental Transaction, the provisions of this Note and the other
      Transaction Documents referring to the “Company” shall refer instead to the
      Successor Entity), and may exercise every right and power of the Company and
      shall assume all of the obligations of the Company under this Note and the
      other
      Transaction Documents with the same effect as if such Successor Entity had
      been
      named as the Company herein. The provisions of this Section shall apply
      similarly and equally to successive Fundamental Transactions.
      No
      sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior
      to the consummation of a Fundamental Transaction, but not prior to the public
      announcement of such Fundamental Transaction, the Company shall deliver written
      notice thereof via facsimile and overnight courier to the Holder (a
“Fundamental
      Transaction Notice”).

     

    5. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Articles of Incorporation (as defined in the Exchange Agreement), Bylaws
      (as
      defined in the Exchange Agreement) or through any reorganization, transfer
      of
      assets, consolidation, merger, scheme of arrangement, dissolution, issue or
      sale
      of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Note, and will at all
      times in good faith carry out all of the provisions of this Note and take all
      action as may be required to protect the rights of the Holder of this Note.
      

     

    
      
         

      

      
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    6. MANDATORY
      REDEMPTIONS.

     

    (a) For
      so
      long as any of the Notes shall remain outstanding, upon the occurrence of each
      Disposition, the Company shall use 75% of the Gross Proceeds (as defined below)
      received (directly or indirectly) by the Company and/or any of its Subsidiaries
      in connection with such Disposition (the “Applicable
      Gross Proceeds”)
      to
      redeem this Note as set forth herein (each being a “Mandatory
      Disposition Redemption”)
      (the
      remaining 25% of the Gross Proceeds with respect to each applicable Disposition
      that is retained by the Company or any Subsidiary is referred to herein as
      the
“Gross
      Proceeds Retained Amount”;
      provided that if the Gross Proceeds Retained Amount as specified above with
      respect to a Disposition exceeds $2,500,000, then all amounts of the Gross
      Proceeds Retained Amount that so exceeds $2,500,000 shall not be retained by
      the
      Company or any Subsidiary and shall instead be added to Applicable Gross
      Proceeds with respect to such Disposition and constitute part of the applicable
      Mandatory Disposition Redemption Price). With respect to each Disposition,
      the
      Company shall deliver a written notice by confirmed facsimile and overnight
      courier (with next day delivery specified) to all, but not less than all, of
      the
      holders of Notes (the “Mandatory
      Disposition Redemption Notice”
and
      the
      date such notice is delivered to all such holders is referred to as the
“Mandatory
      Disposition Redemption Notice Date”)
      stating (a) the date on which the applicable Mandatory Disposition Redemption
      shall occur (the “Mandatory
      Disposition Redemption Date”),
      which
      date shall be the date such Disposition is consummated, (b) the amount of
      Applicable Gross Proceeds (as may be increased by the proviso above in this
      Section 6(a))
      with
      respect to such Disposition and (c) the Mandatory Disposition Redemption
      Price (as defined below) with respect to such Disposition. The applicable
      Mandatory Disposition Redemption
      Notice shall be delivered as soon as practicable prior to the consummation
      of
      the applicable Disposition, and the Company shall make a public announcement
      containing the information set forth in such Mandatory Disposition Redemption
      Notice on or before the applicable Mandatory Disposition Redemption
      Notice Date to the extent that the notices contains any, or constitutes,
      material, non-public information. Redemptions required by this Section
6(a)
      shall be
      made in accordance with the provisions of Section 7.
      To the
      extent redemptions required by this Section 6(a)
      are
      deemed or determined by a court of competent jurisdiction to be prepayments
      of
      this Note by the Company, such redemptions shall be deemed to be voluntary
      prepayments. The Company agrees that in the event of the Company’s redemption of
      any portion of this Note under this Section 6(a),
      the
      Holder’s damages would be uncertain and difficult to estimate because of the
      parties’ inability to predict future interest rates and the uncertainty of the
      availability of a suitable substitute investment opportunity for the Holder.
      “Mandatory
      Disposition Redemption Price”
means,
      with respect to a particular Disposition, an amount in cash equal to the product
      of (i) the Applicable Gross Proceeds (as may be increased by the proviso above
      in this Section 6(a))
      with
      respect to such Disposition multiplied by (ii) the quotient of (1) the sum
      of
      (A) the Principal of this Note outstanding as of the date of redemption,
      (B) the amount of any accrued and unpaid Interest on this Note through the
      date of redemption and (C) the amount of any accrued and unpaid Late
      Charges on such Principal and such Interest specified in clauses (A) and (B)
      through the date of redemption divided by (2) the sum of (X) the principal
      amount of all Notes outstanding as of the date of redemption, (Y) the
      amount of any accrued and unpaid Interest on all Notes through the date of
      redemption and (Z) the amount of any accrued and unpaid Late Charges on
      such principal and such Interest specified in clauses (X) and (Y) through the
      date of redemption. To the extent the Company effects a Mandatory
      Disposition Redemption
      under this Note, then the Company must simultaneously take the same action
      with
      respect to all the Other Notes.

     

    
      
         

      

      
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    (b) For
      so
      long as any of the Notes shall remain outstanding, upon the receipt (directly
      or
      indirectly) by the Company and/or any of its Subsidiaries of any amount of
      cash,
      cash equivalents or publicly-traded securities in connection with, arising
      out
      of or related to the Merger Agreement (as defined below) (including, without
      limitation, under Section 7.02(b) of the Merger Agreement) or the termination
      thereof (in each case, including, without limitation, all judgment and/or
      settlement (as the case may be) proceeds in connection with, arising out of
      or
      related thereto) (all such amounts are referred to herein as “Merger
      Agreement Amounts”)
      which
      in the aggregate exceed $2,000,000 (all such excess Merger Amounts are referred
      to herein as the “Excess Amounts”),
      the
      Company shall use 75% of all Excess Amounts to redeem this Note as set forth
      herein (each being a “Mandatory
      Excess Redemption”)
      (the
      remaining 25% of the Excess Amounts that are retained by the Company is referred
      to herein as the “Excess
      Retained Amount”).
      With
      respect to the receipt of Excess Amounts, the Company shall deliver a written
      notice by confirmed facsimile and overnight courier (with next day delivery
      specified) to all, but not less than all, of the holders of Notes (the
“Mandatory
      Excess Redemption Notice”
and
      the
      date such notice is delivered to all such holders is referred to as the
“Mandatory
      Excess Redemption Notice Date”)
      stating (a) the date on which the applicable Excess Amounts are to be received
      (the “Mandatory
      Excess Redemption Date”),
      which
      date shall be the date of such receipt, (b) the applicable Excess Amounts to
      be
      received and (c) the Mandatory Excess Redemption Price (as defined below)
      with respect to such applicable Excess Amounts to be received. The applicable
      Mandatory Excess Redemption Notice shall be delivered as soon as practicable
      prior to receipt of the applicable Excess Amounts, and the Company shall make
      a
      public announcement containing the information set forth in such Mandatory
      Excess Redemption Notice on or before the applicable Mandatory Excess Redemption
      Notice Date to the extent that the notices contains any, or constitutes,
      material, non-public information. Redemptions required by this Section
6(b)
      shall be
      made in accordance with the provisions of Section 7.
      To the
      extent redemptions required by this Section 6(b)
      are
      deemed or determined by a court of competent jurisdiction to be prepayments
      of
      this Note by the Company, such redemptions shall be deemed to be voluntary
      prepayments. The Company agrees that in the event of the Company’s redemption of
      any portion of this Note under this Section 6(b),
      the
      Holder’s damages would be uncertain and difficult to estimate because of the
      parties’ inability to predict future interest rates and the uncertainty of the
      availability of a suitable substitute investment opportunity for the Holder.
      “Mandatory
      Excess Redemption
      Price”
means,
      with respect to each receipt of the applicable Excess Amounts, an amount in
      cash
      equal to the product of (i) the Excess Amounts to be so received multiplied
      by
      (ii) the quotient of (1) the sum of (A) the Principal of this Note
      outstanding as of the date of redemption, (B) the amount of any accrued and
      unpaid Interest on this Note through the date of redemption and (C) the
      amount of any accrued and unpaid Late Charges on such Principal and such
      Interest specified in clauses (A) and (B) through the date of redemption divided
      by (2) the sum of (X) the principal amount of all Notes outstanding as of
      the date of redemption, (Y) the amount of any accrued and unpaid Interest
      on all Notes through the date of redemption and (Z) the amount of any
      accrued and unpaid Late Charges on such principal and such Interest specified
      in
      clauses (X) and (Y) through the date of redemption. To the extent the Company
      effects a Mandatory Excess Redemption under this Note, then the Company must
      simultaneously take the same action with respect to all the Other Notes. The
      Company shall use its good faith best efforts to cause the Merger Agreement
      Amounts to only constitute cash, cash equivalents or publicly-traded
      securities.

     

    
      
         

      

      
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    7. REDEMPTIONS.

     

    (a) Mechanics.
      The
      Company shall deliver the Event of Default Redemption Price to the Holder in
      cash within seven (7) Business Days after the Company’s receipt of the Holder’s
      Event of Default Redemption Notice. The Company shall deliver the applicable
      Mandatory Disposition Redemption Price to the Holder in cash on the applicable
      Mandatory Disposition Redemption Date. The Company shall deliver the applicable
      Mandatory Excess Redemption Price to the Holder in cash on the applicable
      Mandatory Excess Redemption Date. In the event of a redemption of less than
      all
      of the then outstanding Principal of this Note, the Company shall promptly
      cause
      to be issued and delivered to the Holder a new Note (in accordance with Section
      13(d))
      representing the outstanding Principal which has not been redeemed. In the
      event
      that the Company does not pay the applicable Redemption Price to the Holder
      within the time period, or on the date, required (as the case may be), at any
      time thereafter and until the Company pays such unpaid Redemption Price in
      full,
      the Holder shall have the option, in lieu of redemption, to require the Company
      to promptly return to the Holder all or any portion of this Note representing
      the Principal amount that was submitted for redemption and for which the
      applicable Redemption Price (together with any Late Charges thereon) has not
      been paid by delivering written notice by confirmed facsimile and overnight
      courier (with next day delivery specified) stating such. Upon the Company’s
      receipt of such notice, (x) the applicable Redemption Notice shall be null
      and
      void with respect to such Principal amount and (y) the Company shall immediately
      return this Note, or issue a new Note (in accordance with Section 13(d))
      to the
      Holder representing the sum of such Principal amount to be redeemed together
      with accrued and unpaid Interest with respect to such Principal amount and
      accrued and unpaid Late Charges with respect to such Principal amount and
      Interest. The Holder’s delivery of a notice voiding a Redemption Notice and
      exercise of its rights following such notice shall not affect the Company’s
      obligations to make any payments of Late Charges which have accrued prior to
      the
      date of such notice with respect to the Principal amount subject to such
      notice.

     

    (b) Redemption
      by Other Holders.
      Upon
      the Company’s receipt of notice from any of the holders of the Other Notes for
      redemption or repayment as a result of an event or occurrence substantially
      similar to the events or occurrences described in Section 3(b)
      (each,
      an “Other
      Redemption Notice”),
      the
      Company shall immediately, but no later than one (1) Business Day of its receipt
      thereof, forward to the Holder by facsimile a copy of such notice. If the
      Company receives a Redemption Notice and one or more Other Redemption Notices,
      during the seven (7) Business Day period beginning on and including the date
      which is three (3) Business Days prior to the Company’s receipt of the Holder’s
      applicable Redemption Notice and ending on and including the date which is
      three
      (3) Business Days after the Company’s receipt of the Holder’s applicable
      Redemption Notice and the Company is unable to redeem all principal, interest
      and other amounts designated in such Redemption Notice and such Other Redemption
      Notices received during such seven (7) Business Day period, then the Company
      shall redeem a pro rata amount from each holder of the Notes (including the
      Holder) based on the principal amount of the Notes submitted for redemption
      pursuant to such Redemption Notice and such Other Redemption Notices received
      by
      the Company during such seven (7) Business Day period. 

     

    
      
         

      

      
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    8. VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note.

     

    9. COVENANTS.

     

    (a) Rank.
      All
      payments due under this Note (a) shall rank pari
      passu
      with all
      Other Notes and (b) shall be senior to all other Indebtedness of the Company
      and
      its Subsidiaries.

     

    (b) Incurrence
      of Indebtedness.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall cause
      each of its Subsidiaries to not, directly or indirectly, without the prior
      express written consent of the Holder, incur or guarantee, assume or suffer
      to
      exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note
      and the Other Notes, (ii) Permitted Indebtedness and (iii) Indebtedness solely
      between or among the Company and any of its Subsidiaries.

     

    (c) Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall cause
      each of its Subsidiaries to not, directly or indirectly, without the prior
      express written consent of the Holder allow or suffer to exist any mortgage,
      lien, pledge, charge, security interest or other encumbrance upon or in any
      property or assets (including accounts and contract rights) owned by the Company
      or any of its Subsidiaries (collectively, “Liens”)
      other
      than Permitted Liens.

     

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall cause each of its Subsidiaries to
      not,
      directly or indirectly, without the prior express written consent of the Holder,
      redeem, defease, repurchase, repay or make any payments in respect of, by the
      payment of cash or cash equivalents (in whole or in part, whether by way of
      open
      market purchases, tender offers, private transactions or otherwise), all or
      any
      portion of any Indebtedness (other than Indebtedness solely between or among
      the
      Company and any of its Subsidiaries), whether by way of payment in respect
      of
      principal of (or premium, if any) or interest on, such Indebtedness if at the
      time such payment is due or is otherwise made or, after giving effect to such
      payment, (i) an event constituting an Event of Default has occurred and is
      continuing or (ii) an event that with the passage of time and without being
      cured would constitute an Event of Default has occurred and is continuing.
      The
      Company shall not, and the Company shall cause each of its Subsidiaries to
      not,
      directly or indirectly, take any action or omit to take any action to cause,
      or
      that would result in, any amounts which would constitute either Gross Proceeds,
      Merger Agreement Amounts or Excess Amounts hereunder, if received directly
      or
      indirectly by the Company or any of its Subsidiaries, to either not (1) be
      received directly or indirectly by the Company or any of its Subsidiaries or
      (2)
      constitute either Gross Proceeds, Merger Agreement Amounts or Excess Amounts.
      All Gross Proceeds Retained Amounts (as may be reduced by the proviso in Section
      6(a))
      and all
      Excess Retained Amounts shall be used by the Company and the Subsidiaries solely
      for general working capital purposes and as set forth on Schedule
      9(d)
      attached
      hereto.

     

    
      
         

      

      
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    (e) Restriction
      on Redemption and Cash Dividends; Affiliate Transactions.
      Until
      all of the Notes have been redeemed or otherwise satisfied in accordance with
      their terms, the Company shall not, directly or indirectly, redeem, repurchase
      or declare or pay any cash dividend or distribution on its capital shares
      without the prior express written consent of the Holder. The Company shall
      not,
      and shall cause each Subsidiary to not, enter into any transaction with any
      of
      its or their respective current or former officers, directors or employees
      or
      pay any amounts to any of them except to the extent provided on Schedule
      9(e)
      attached
      hereto.

     

    (f) Restriction
      on Transfer of Assets. The
      Company shall not, and shall cause each Subsidiary to not, without the prior
      express written consent of the Holder (which consent shall not be unreasonably
      withheld (it shall be deemed reasonable for the Holder to withhold consent
      if
      proceeds (directly or indirectly) received or to be received in connection
      with
      any Disposition include or constitute any consideration other than cash, cash
      equivalents or publicly-traded securities)), sell, lease, license, assign,
      transfer, convey or otherwise dispose of any assets or rights of the Company
      or
      any Subsidiary owned or hereafter acquired whether in a single transaction
      or a
      series of related transactions, other than (i) sales, leases, licenses,
      assignments, transfers, conveyances and other dispositions of such assets or
      rights by the Company and its Subsidiaries that, in the aggregate, do not have
      a
      fair market value in excess of $250,000 in any twelve (12) month period and
      (ii)
      sales of inventory in the ordinary course of business (such sales, leases,
      licenses, assignments, transfers, conveyances and other dispositions in clauses
      (i) and (ii) are each referred to herein as a “Permitted
      Sale”).
      Notwithstanding the foregoing, this Section 9(f)
      shall
      not be applicable if on the Issuance Date the initial Holder, together with
      its
      affiliates, held less than $4,000,000 of the aggregate amount of Indebtedness
      evidenced by this Note and all the Other Notes.

     

    (g) Maturity
      of Indebtedness.
      The
      Company shall not, and the Company shall cause each of its Subsidiaries to
      not,
      permit any Indebtedness of the Company or any of the Subsidiaries to mature
      or
      accelerate prior to the Maturity Date.

     

    (h) New
      Subsidiaries.
      Simultaneously with the acquisition or formation of each New Subsidiary (as
      defined below), the Company shall cause such New Subsidiary to execute, and
      deliver to each holder of Notes, all Security Documents required to be executed
      by each of the Current Subsidiaries on the Closing Date.

     

    
      
         

      

      
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    10. SECURITY.
      This
      Note and the Other Notes are secured to the extent and in the manner set forth
      in the Transaction Documents (including, without limitation, the Security
      Documents and the Guaranties (each as defined in the Exchange
      Agreement)).

     

    11. AMENDING
      THE TERMS OF THIS NOTE.
      The
      prior written consent of the Holder shall be required for any change or
      amendment to this Note. No
      consideration shall be offered or paid to the Holder to amend or consent to
      a
      waiver or modification of any provision of this Note unless the same
      consideration is also offered to all of the holders of the Other Notes.
The
      Holder shall be entitled, at its option, to the benefit of any amendment to
      any
      of the Other Notes.

     

    12. TRANSFER.
      This
      Note may be offered, sold, assigned or transferred by the Holder without the
      consent of the Company.

     

    13. REISSUANCE
      OF THIS NOTE.

     

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 13(d)),
      registered as the Holder may request, representing the outstanding Principal
      being transferred by the Holder and, if less than the entire outstanding
      Principal is being transferred, a new Note (in accordance with Section
13(d))
      to the
      Holder representing the outstanding Principal not being transferred. The Holder
      and any assignee, by acceptance of this Note, acknowledge and agree that, by
      reason of the provisions of Section 1
      following redemption of any portion of this Note, the outstanding Principal
      represented by this Note may be less than the Principal stated on the face
      of
      this Note.

     

    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note (as to which a written
      certification and the indemnification contemplated below shall suffice as such
      evidence), and, in the case of loss, theft or destruction, of any
      indemnification undertaking by the Holder to the Company in customary and
      reasonable form and, in the case of mutilation, upon surrender and cancellation
      of this Note, the Company shall execute and deliver to the Holder a new Note
      (in
      accordance with Section 13(d))
      representing the outstanding Principal.

     

    (c) Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      13(d)
      and in
      principal amounts of at least $100,000) representing in the aggregate the
      outstanding Principal of this Note, and each such new Note will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      13(a)
      or
      Section 13(c),
      the
      Principal designated by the Holder which, when added to the principal
      represented by the other new Notes issued in connection with such issuance,
      does
      not exceed the Principal remaining outstanding under this Note immediately
      prior
      to such issuance of new Notes), (iii) shall have an issuance date, as indicated
      on the face of such new Note, which is the same as the Issuance Date of this
      Note, (iv) shall have the same rights and conditions as this Note, and (v)
      shall
      represent accrued and unpaid Interest and Late Charges on the Principal and
      Interest of this Note, from the Issuance Date.

     

    
      
         

      

      
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    14. REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the Holder’s right to pursue
      actual and consequential damages for any failure by the Company to comply with
      the terms of this Note. The Company covenants to the Holder that there shall
      be
      no characterization concerning this instrument other than as expressly provided
      herein. Amounts set forth or provided for herein with respect to payments,
      conversion and the like (and the computation thereof) shall be the amounts
      to be
      received by the Holder and shall not, except as expressly provided herein,
      be
      subject to any other obligation of the Company (or the performance thereof).
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Holder and that the remedy at law for any such breach
      may be inadequate. The Company therefore agrees that, in the event of any such
      breach or threatened breach, the Holder shall be entitled, in addition to all
      other available remedies, to an injunction restraining any breach, without
      the
      necessity of showing economic loss and without any bond or other security being
      required.

     

    15. PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors’ rights and
      involving a claim under this Note, then the Company shall pay the costs incurred
      by the Holder for such collection, enforcement or action or in connection with
      such bankruptcy, reorganization, receivership or other proceeding, including,
      without limitation, attorneys’ fees and disbursements.

     

    16. CONSTRUCTION;
      HEADINGS.
      This
      Note shall be deemed to be jointly drafted by the Company and the Holder and
      shall not be construed against any Person as the drafter hereof. The headings
      of
      this Note are for convenience of reference and shall not form part of, or affect
      the interpretation of, this Note. Terms used in this Note but defined in the
      other Transaction Documents shall have the meanings ascribed to such terms
      on
      the Closing Date in such other Transaction Documents unless otherwise consented
      to in writing by the Holder.

     

    17. FAILURE
      OR INDULGENCE NOT WAIVER.
      No
      failure or delay on the part of the Holder in the exercise of any power, right
      or privilege hereunder shall operate as a waiver thereof, nor shall any single
      or partial exercise of any such power, right or privilege preclude other or
      further exercise thereof or of any other right, power or privilege. No waiver
      shall be effective unless it is in writing and signed by an authorized
      representative of the waiving party.

     

    
      
         

      

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

     

    19. NOTICES;
      PAYMENTS.

     

    (a) Notices.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Transaction Agreement. The Company shall provide the Holder with prompt
      written notice of all actions taken pursuant to this Note, including in
      reasonable detail a description of such action and the reason therefore,
      provided in each case that such information shall be made known to the public
      prior to or in conjunction with such notice being provided to the
      Holder.

     

    (b) Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a certified check drawn on the account of the Company and sent via
      overnight courier service to such Person at such address as previously provided
      to the Company in writing (which address, in the case of the Holder, shall
      initially be as set forth on the Schedule of Buyers attached to the Transaction
      Agreement); provided that the Holder may elect to receive a payment of cash
      via
      wire transfer of immediately available funds by providing the Company with
      prior
      written notice setting out such request and the Holder’s wire transfer
      instructions. Whenever any amount expressed to be due by the terms of this
      Note
      is due on any day which is not a Business Day, the same shall instead be due
      on
      the next succeeding day which is a Business Day. Any amount of Principal or
      other amounts due under this Note which is not paid when due shall result in
      a
      late charge being incurred and payable by the Company in an amount equal to
      interest on such amount at the rate of eighteen percent (18%) per annum from
      the
      date such amount was due until the same is paid in full (“Late
      Charge”).

     

    
      
         

      

      
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    20. CANCELLATION.
      After
      all Principal, accrued Interest, Late Charges and other amounts at any time
      owed
      on this Note have been paid in full, this Note shall automatically be deemed
      canceled, shall be surrendered to the Company for cancellation and shall not
      be
      reissued.

     

    21. WAIVER
      OF NOTICE.
      To the
      extent permitted by law, the Company hereby irrevocably waives demand, notice,
      presentment, protest and all other demands and notices in connection with the
      delivery, acceptance, performance, default or enforcement of this Note and
      the
      other Transaction Documents.

     

    22. GOVERNING
      LAW.
      Pursuant to 735 Illinois Compiled Statutes 105/5-5, all questions concerning
      the
      construction, validity, enforcement, performance and interpretation of this
      Note
      shall be governed by the internal laws of the State of Illinois, without giving
      effect to any choice of law or conflict of law provision or rule (whether of
      the
      State of Illinois or any other jurisdictions) that would cause the application
      of the laws of any jurisdictions other than the State of Illinois. The Company
      hereby irrevocably submits to the exclusive jurisdiction of the state and
      federal courts sitting in Chicago, Illinois, for the adjudication of any dispute
      hereunder or in connection herewith or with any transaction contemplated hereby
      or discussed herein, and hereby irrevocably waives, and agrees not to assert
      in
      any suit, action or proceeding, any claim that it is not personally subject
      to
      the jurisdiction of any such court, that such suit, action or proceeding is
      brought in an inconvenient forum or that the venue of such suit, action or
      proceeding is improper. Nothing contained herein shall be deemed to limit in
      any
      way any right to serve process in any manner permitted by law. In the event
      that
      any provision of this Note is invalid or unenforceable under any applicable
      statute or rule of law, then such provision shall be deemed inoperative to
      the
      extent that it may conflict therewith and shall be deemed modified to conform
      with such statute or rule of law. Any such provision which may prove invalid
      or
      unenforceable under any law shall not affect the validity or enforceability
      of
      any other provision of this Note. Nothing contained herein shall be deemed
      or
      operate to preclude the Holder from bringing suit or taking other legal action
      against the Company in any other jurisdiction to collect on the Company’s
      obligations to the Holder, to realize on any collateral or any other security
      for such obligations, or to enforce a judgment or other court ruling in favor
      of
      the Holder. THE
      COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    23. CERTAIN
      DEFINITIONS.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a) “Amended
      Registration Rights Agreement”
means
      that certain registration rights agreement, dated as of August 3, 2007, by
      and
      among the Company and the parties identified on the signature pages thereto,
      as
      amended and restated in its entirety as of the Closing Date and as further
      amended from time to time.

     

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

     

    
      
         

      

      
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    (c) “Closing
      Date”
shall
      have the meaning set forth in the Exchange Agreement, which date is the date
      the
      Company initially issued this Note pursuant to the terms of the Exchange
      Agreement.

     

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

     

    (e) “Current
      Subsidiaries”
means,
      collectively, Workstream USA, Inc., a Delaware corporation, Paula Allen
      Holdings, Inc., a Florida corporation, The Omni Partners, Inc., a Florida
      corporation, 6FigureJobs.com, Inc., a Delaware corporation, and Workstream
      Merger Sub Inc., a Delaware corporation, and each of the foregoing,
      individually, a “Current
      Subsidiary.”

     

    (f) “Disposition”
means
      the sale, lease, license, assignment, transfer, conveyance or other disposition
      of any assets or rights of the Company or any of its Subsidiaries, whether
      now
      owned or hereafter acquired, other than a Permitted Sale.

     

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

     

    (h) “Exchange Agreement”
means
      that certain Exchange Agreement, dated as of August 29, 2008, by and between
      the
      Company and the Holder, as amended from time to time.

     

    (i) “Exchange Agreements”
means,
      collectively, the Exchange Agreement and the Other Exchange Agreements (as
      defined below), as amended from time to time.

     

    (j) “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, lease, license,
      assign, transfer, convey or otherwise dispose of all or substantially all of
      the
      properties or assets of the Company to another Person, or (iii) allow another
      Person to make a purchase, tender or exchange offer that is accepted by the
      holders of more than 50% of the outstanding Common Shares (not including any
      Common Shares held by the Person or Persons making or party to, or associated
      or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), or (iv) consummate a stock or share purchase agreement or
      other
      business combination (including, without limitation, a reorganization,
      recapitalization, spin-off or scheme of arrangement) with another Person whereby
      such other Person acquires more than the 50% of the outstanding Common Shares
      (not including any Common Shares held by the other Person or other Persons
      making or party to, or associated or affiliated with the other Persons making
      or
      party to, such stock or share purchase agreement or other business combination),
      or (v) reorganize, recapitalize or reclassify its Common Shares, or (vi) any
      “person” or “group” (as these terms are used for purposes of Sections 13(d) and
      14(d) of the 1934 Act (as defined in the Exchange Agreement)) is or shall become
      the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly
      or indirectly, of 50% of the aggregate ordinary voting power represented by
      issued and outstanding Common Shares.

     

    
      
         

      

      
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    (k) “GAAP”
means
      United States generally accepted accounting principles, consistently
      applied.

     

    (l) “Gross Proceeds”
means
      all proceeds in respect of the applicable Disposition (including, without
      limitation, all installment obligations and earn-out and other contingent
      payments) net of any income taxes required to be paid by the Company or any
      Subsidiary (as the case may be) solely in connection with or solely arising
      out
      of such Disposition; provided that the foregoing cash proceeds shall not be
      reduced by any other amount, including, without limitation, the actual
      reasonable legal, accounting, investment banking, broker and other
      professionals’ fees incurred by the Company by virtue of the applicable
      Disposition). Any dispute as to the arithmetic calculation of Gross Proceeds
      shall be resolved pursuant to Section 18
      above,
      with the term “Gross Proceeds” being substituted for the term “fair market
      value.”

     

    (m) “Interest Rate”
means
      seven percent (7%) per annum, provided that the Interest Rate shall be increased
      to twelve percent (12%) per annum from and after the first (1st)
      anniversary of the Issuance Date if less than fifty percent (50%) of the sum
      of
      (i) the original Principal amount of this Note plus (ii) all accrued and unpaid
      Interest on such Principal through such first anniversary plus (iii) accrued
      and
      unpaid Late Charges on such Principal and Interest through such first
      anniversary has been paid to the Holder on or prior to such first
      anniversary.

     

    (n) “Maturity Date”
shall
      mean the two (2) year anniversary of the Issuance Date; provided,
      however,
      that
      the Maturity Date may be extended at the option of the Holder (i) in the event
      that, and for so long as, an Event of Default shall have occurred and be
      continuing or any event shall have occurred and be continuing that with the
      passage of time and the failure to cure would result in an Event of Default
      or
      (ii) through the date that is twenty (20) Business Days after the consummation
      of a Fundamental Transaction in the event that a Fundamental Transaction is
      publicly announced or a Fundamental Transaction Notice is delivered prior to
      the
      Maturity Date.

     

    (o) “Merger
      Agreement”
means
      that certain Agreement and Plan of Merger, dated February 12, 2008, among the
      Company, Workstream Merger Sub Inc., a wholly-owned subsidiary of the Company,
      Empagio Acquisition LLC and SMB Capital Corporation. 

     

    (p) “New
      Subsidiaries”
means,
      as of any date of determination, any Person (i) in which the Company on or
      after
      the date of the Exchange Agreement, directly or indirectly, owns or acquires
      any
      of the outstanding capital stock or holds any equity or similar interest of
      such
      Person or (ii) in which the Company on or after the date of the Exchange
      Agreement, directly or indirectly, controls or operates all or any part of
      the
      business, operations or administration of such Person, and each of the
      foregoing, individually, a “New
      Subsidiary.”

     

    
      
         

      

      
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    (q) “Notes”
means,
      collectively, this Note and all the Other Notes.

     

    (r) “Other Exchange Agreements”
means,
      collectively, those certain separate exchange agreements, each dated as of
      August 29, 2008, (other than the Exchange Agreement) by and between the Company
      and each of the parties thereto, as amended from time to time.

     

    (s) “Other Notes”
means,
      collectively, all senior secured notes issued on the Closing Date by the Company
      pursuant to the Other Exchange Agreements, and shall include all senior secured
      notes issued in exchange therefor or replacement thereof.

     

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

     

    (u) “Permitted
      Liens”
means
      (i) any Lien for taxes, assessments and governmental charges not yet due or
      delinquent or being contested in good faith by appropriate proceedings for
      which
      adequate reserves have been established in accordance with GAAP, (ii) any
      statutory Lien arising in the ordinary course of business by operation of law
      with respect to a liability that is not yet due or delinquent, (iii) any Lien
      created by operation of law, such as materialmen’s liens, mechanics’ liens and
      other similar liens, arising in the ordinary course of business with respect
      to
      a liability that is not yet due or delinquent or that are being contested in
      good faith by appropriate proceedings, (iv) Liens securing Permitted
      Indebtedness and (v) Liens securing the obligations of the Company and the
      Subsidiaries under the Notes.

     

    (v) “Permitted
      Indebtedness”
      means
      (i) total Indebtedness of the Company and the Subsidiaries not to exceed $2
      million in the aggregate outstanding at any time; provided, however, that such
      Indebtedness shall be made expressly subordinate in right of payment to the
      Indebtedness evidenced by the Notes, as reflected in a written agreement
      acceptable to the Holder and approved by the Holder in writing, and which
      Indebtedness does not provide at any time for the payment, prepayment,
      repayment, repurchase or defeasance, directly or indirectly, of any principal
      or
      premium, if any, thereon until ninety-one (91) days after the Maturity Date
      or
      later; (ii) equipment leases and purchase money obligations of the Company
      and
      the Subsidiaries not to exceed $1,000,000 in the aggregate outstanding at any
      time, and (iii) Indebtedness evidenced by this Note and the Other
      Notes.

     

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

     

    (x) “Principal
      Market”
means
      the Nasdaq Capital Market.

     

    (y) “Redemption
      Notices”
means,
      collectively, the Event of Default Redemption Notice, the Mandatory Excess
      Redemption Notice and each Mandatory Disposition Redemption Notice, and each
      of
      the foregoing, individually, a “Redemption
      Notice.”

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    (z) “Redemption
      Premium”
means
      110%.

     

    (aa) “Redemption
      Prices”
means,
      collectively, the Event of Default Redemption Price, the Mandatory Excess
      Redemption Price and each applicable Mandatory Disposition Redemption Price,
      and
      each of the foregoing, individually, a “Redemption
      Price.”

     

    (bb) “SEC”
means
      the United States Securities and Exchange Commission.

     

    (cc) “Security
      Agreement”
means
      that certain security agreement, dated as of the Closing Date, by and among
      the
      Company, the Subsidiaries and the initial holders of the Notes, as amended
      from
      time to time.

     

    (dd) “Subsidiaries”
means,
      as of any date of determination, collectively, all Current Subsidiaries and
      all
      New Subsidiaries, and each of the foregoing, individually, a “Subsidiary.”

     

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

     

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

     

    (gg) “Transaction
      Agreement”
means
      that certain Transaction Agreement, dated as of July 25, 2007, by and among
      the
      Company and the investors listed on the Schedule of Buyers attached thereto,
      as
      amended by the Exchange Agreements and as further amended from time to
      time.

     

    (hh) “Transaction
      Documents”
means,
      collectively, the Transaction Documents (as defined in the Transaction
      Agreement) and the Exchange Documents (as defined in the Exchange Agreement),
      as
      amended from time to time.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    24. DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or any of its subsidiaries, the Company shall within
      two
      (2) Business Day after any such receipt or delivery publicly disclose such
      material, nonpublic information on a Current Report on Form 8-K or otherwise.
      In
      the event that the Company believes that a notice contains material, nonpublic
      information relating to the Company or any of its subsidiaries, the Company
      so
      shall indicate to such Holder contemporaneously with delivery of such notice,
      and in the absence of any such indication, the Holder shall be allowed to
      presume that all matters relating to such notice do not constitute material,
      nonpublic information relating to the Company or its subsidiaries. Nothing
      contained in this Section 24
      shall
      limit any obligations of the Company, or any rights of the Holder, under Section
      4(i) of the Transaction Agreement or under Section 4(f) of the Exchange
      Agreement.

     

    [signature
      page follows]

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

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

    

    
      	
              COMPANY:

            
	 
	
              WORKSTREAM
                INC.

            
	 
	
              By:

            	     
	 
	 	
              Name:
                

            	    
	 
	 	
              Title:Exhibit
      10.3

    SECURITY
      AGREEMENT

    

    This
      SECURITY
      AGREEMENT
      (this
“Agreement”),
      dated
      as of August 29, 2008, is made by and among the Grantors listed on the signature
      pages hereof (collectively, jointly and severally, the “Grantors”
and
      each, individually, a “Grantor”),
      and
      the Secured Parties listed on the signature pages hereof (collectively, the
      “Secured
      Parties”
and
      each, individually, a “Secured
      Party”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      pursuant to those certain separate Exchange Agreements, each dated as of August
      29, 2008 (as amended, restated, supplemented, or otherwise modified from time
      to
      time, including all schedules thereto, collectively, the “Exchange
      Agreements”),
      by
      and between WORKSTREAM INC., a corporation existing pursuant to the Canada
      Business Corporations Act (“Parent”),
      and
      each of the Secured Parties, Parent has agreed to exchange each Secured Party’s
      Special Warrant and 2007 Warrant (as defined in the Exchange Agreements) for
      a
      Note and a Warrant;

     

    WHEREAS,
      each
      Grantor other than Parent is a direct or indirect wholly-owned subsidiary of
      Parent and will receive direct and substantial benefits from such exchanges;
      and

     

    WHEREAS,
      in
      order to induce each Secured Party to so exchange its Special Warrant and 2007
      Warrant for a Note and a Warrant, as provided for in the Exchange Agreements,
      Grantors have agreed to grant a continuing security interest in and to the
      Collateral in order to secure the prompt and complete payment, observance and
      performance of the Secured Obligations.

     

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

     

    1. Defined
      Terms.
      All
      capitalized terms used herein (including in the preamble and recitals hereof)
      without definition shall have the meanings ascribed thereto in the Notes. Any
      terms used in this Agreement that are defined in the Code shall be construed
      and
      defined as set forth in the Code unless otherwise defined herein or in the
      Notes; provided,
      however,
      that if
      the Code is used to define any term used herein and if such term is defined
      differently in different Articles of the Code, the definition of such term
      contained in Article 9 of the Code shall govern. In addition to those terms
      defined elsewhere in this Agreement, as used in this Agreement, the following
      terms shall have the following meanings:

     

    (a) “Account”
means
      an account (as that term is defined in the Code).

     

    (b) “Account
      Debtor”
means
      an account debtor (as that term is defined in the Code).

     

    (c) “Bankruptcy
      Code”
means
      title 11 of the United States Code, as in effect from time to time.

     

    (d) “Books”
means
      books and records (including each Grantor’s Records indicating, summarizing, or
      evidencing each Grantor’s assets (including the Collateral) or liabilities, each
      Grantor’s Records relating to its business operations or financial condition,
      and each Grantor’s goods or General Intangibles related to such
      information).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e) “Chattel
      Paper”
means
      chattel paper (as that term is defined in the Code) and includes tangible
      chattel paper and electronic chattel paper.

     

    (f) “Code”
means
      the Illinois Uniform Commercial Code, as in effect from time to time;
provided,
      however,
      that in
      the event that, by reason of mandatory provisions of law, any or all of the
      attachment, perfection, priority, or remedies with respect to any Secured
      Party’s Lien on any Collateral is governed by the Uniform Commercial Code as
      enacted and in effect in a jurisdiction other than the State of Illinois, the
      term “Code” shall mean the Uniform Commercial Code as enacted and in effect in
      such other jurisdiction solely for purposes of the provisions thereof relating
      to such attachment, perfection, priority, or remedies.

     

    (g) “Collateral”
has
      the
      meaning specified therefor in Section 2.

     

    (h) “Commencement
      Notice”
means
      a
      written notice, given by any Secured Party to the other Secured Parties in
      accordance with the notice provisions set forth in the Transaction Agreement
      (as
      defined in the Notes), pursuant to which such Secured Party notifies the other
      Secured Parties of the existence of one or more Events of Default and of such
      Secured Party’s intent to commence the exercise of one or more of the remedies
      provided for under this Agreement with respect to all or any portion of the
      Collateral as a consequence thereof, which notice shall incorporate a reasonably
      detailed description of each Event of Default then existing and of the remedial
      action proposed to be taken.

     

    (i) “Commercial
      Tort Claims”
means
      commercial tort claims (as that term is defined in the Code), and includes
      those
      commercial tort claims listed on Schedule
      1
      attached
      hereto.

     

    (j) “Control
      Agreement”
means
      a
      control agreement, in form and substance satisfactory to Secured Parties,
      executed and delivered by a Grantor, one or more Secured Parties, and the
      applicable securities intermediary (with respect to a Securities Account) or
      bank (with respect to a Deposit Account).

     

    (k) “Copyrights”
means
      copyrights and copyright registrations, and also includes (i) the copyright
      registrations and recordings thereof and all applications in connection
      therewith listed on Schedule
      2
      attached
      hereto and made a part hereof, (ii) all reissues, continuations, extensions
      or
      renewals thereof, (iii) all income, royalties, damages and payments now and
      hereafter due or payable under and with respect thereto, including payments
      under all licenses entered into in connection therewith and damages and payments
      for past or future infringements or dilutions thereof, (iv) the right to sue
      for
      past, present and future infringements and dilutions thereof, (v) the goodwill
      of each Grantor’s business symbolized by the foregoing or connected therewith,
      and (vi) all of each Grantor’s rights corresponding thereto throughout the
      world.

     

    (l) “Copyright
      Security Agreement”
means
      each Copyright Security Agreement among Grantors, or any of them, and Secured
      Parties, in substantially the form of Exhibit
      A
      attached
      hereto, pursuant to which Grantors have granted to each Secured Party a security
      interest in all their respective Copyrights.

     

    (m) “Deposit
      Account”
means
      a
      deposit account (as that term is defined in the Code).

     

    (n) “Equipment”
means
      equipment (as that term is defined in the Code).

     

    (o) “Event
      of Default”
has
      the
      meaning specified therefor in the Notes.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (p) “Exchange
      Agreements”
has
      the
      meaning specified therefor in the recitals to this Agreement.

     

    (q) “General
      Intangibles”
means
      general intangibles (as that term is defined in the Code) and, in any event,
      includes payment intangibles, contract rights, rights to payment, rights arising
      under common law, statutes, or regulations, choses or things in action, goodwill
      (including the goodwill associated with any Trademark, Patent, or Copyright),
      Patents, Trademarks, Copyrights, URLs and domain names, industrial designs,
      other industrial or Intellectual Property or rights therein or applications
      therefor, whether under license or otherwise, programs, programming materials,
      blueprints, drawings, purchase orders, customer lists, monies due or recoverable
      from pension funds, route lists, rights to payment and other rights under any
      royalty or licensing agreements, including Intellectual Property Licenses,
      infringement claims, computer programs, information contained on computer disks
      or tapes, software, literature, reports, catalogs, pension plan refunds, pension
      plan refund claims, insurance premium rebates, tax refunds, and tax refund
      claims, interests in a partnership or limited liability company which do not
      constitute a security under Article 8 of the Code, and any other personal
      property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
      Deposit Accounts, goods, Investment Related Property, Negotiable Collateral,
      and
      oil, gas, or other minerals before extraction.

     

    (r) “Governmental
      Authority”
means
      any domestic or foreign federal, state, local, or other governmental or
      administrative body, instrumentality, board, department, or agency or any court,
      tribunal, administrative hearing body, arbitration panel, commission, or other
      similar dispute-resolving panel or body.

     

    (s) “Grantor”
and
      “Grantors”
have
      the meanings specified therefor in the recitals to this Agreement.

     

    (t) “Guaranties”
means
      each Guaranty dated of even date herewith executed by Guarantors in favor of
      any
      or all of the Secured Parties, together with any other guaranty or similar
      agreement now or hereafter executed by a Guarantor in favor of any or all of
      the
      Secured Parties in connection with the Notes or any of the other Transaction
      Documents. 

     

    (u) “Guarantor”
means
      each Grantor, other than Parent, and each other Person that now or hereafter
      executes a Guaranty.

     

    (v) “Insolvency
      Proceeding”
means
      any proceeding commenced by or against any Person under any provision of the
      Bankruptcy Code or under any other state or federal bankruptcy or insolvency
      law
      or any equivalent laws in any other jurisdiction, assignments for the benefit
      of
      creditors, formal or informal moratoria, compositions, extensions generally
      with
      creditors, or proceedings seeking reorganization, arrangement, or other similar
      relief.

     

    (w) “Intellectual
      Property”
means
      Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks,
      trade secrets and customer lists, and Intellectual Property
      Licenses.

     

    (x) “Intellectual
      Property Licenses”
means
      rights under or interests in any patent, trademark, copyright or other
      intellectual property, including software license agreements with any other
      party, whether the applicable Grantor is a licensee or licensor under any such
      license agreement, including the license agreements listed on Schedule
      3 attached
      hereto and made a part hereof.

     

    (y) “Inventory”
means
      inventory (as that term is defined in the Code).

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (z) “Investment
      Related Property”
means
      (i) investment property (as that term is defined in the Code), and (ii) all
      of
      the following (regardless of whether classified as investment property under
      the
      Code): all Pledged Interests, Pledged Operating Agreements, and Pledged
      Partnership Agreements.

     

    (aa) “Lien”
has
      the
      meaning specified therefor in the Notes.

     

    (bb) “Negotiable
      Collateral”
means
      letters of credit, letter-of-credit rights, instruments, promissory notes,
      drafts, and documents.

     

    (cc) “New
      Subsidiary”
has
      the
      meaning specified therefor in the Notes.

     

    (dd) “Notes”
has
      the
      meaning specified therefor in the Exchange Agreements.

     

    (ee) “Parent”
has
      the
      meaning specified therefor in the recitals to this Agreement.

     

    (ff) “Patents”
means
      patents and patent applications, and also includes (i) the patents and patent
      applications listed on Schedule
      4
      attached
      hereto and made a part hereof, (ii) all renewals thereof, (iii) all income,
      royalties, damages and payments now and hereafter due or payable under and
      with
      respect thereto, including payments under all licenses entered into in
      connection therewith and damages and payments for past or future infringements
      or dilutions thereof, (iv) the right to sue for past, present and future
      infringements and dilutions thereof, and (v) all of each Grantor’s rights
      corresponding thereto throughout the world.

     

    (gg) “Patent
      Security Agreement”
means
      each Patent Security Agreement among Grantors and Secured Parties in
      substantially the form of Exhibit
      B
      attached
      hereto, pursuant to which Grantors have granted to each Secured Party a security
      interest in all their respective Patents.

     

    (hh) “Permitted
      Liens”
has
      the
      meaning specified therefor in the Notes.

     

    (ii) “Permitted
      Secured Party”
means,
      with respect to the exercise of any remedy provided for under this Agreement,
      any Secured Party that has delivered a Commencement Notice with respect to
      the
      exercise of such remedy to the other Secured Parties and has not received a
      Veto
      Notice with respect thereto within the Veto Period; provided,
      however,
      that
      there shall only be a single Permitted Secured Party that may exercise any
      specific remedy at any one time (it being agreed that if a Commencement Notice
      is delivered by more than one Secured Party with respect to any remedy provided
      for under this Agreement, then the first Secured Party to deliver a Commencement
      Notice and not receive a Veto Notice within the Veto Period shall be the only
      Secured Party that may exercise such remedy).

     

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

     

    (kk) “Pledged
      Companies”
means,
      each Person listed on Schedule
      5
      hereto
      as a “Pledged Company”, together with each other Person all or a portion of
      whose Stock is acquired or otherwise owned by a Grantor after the date
      hereof.

     

    (ll) “Pledged
      Interests”
means
      all of each Grantor’s right, title and interest in and to all of the Stock now
      or hereafter owned by such Grantor, regardless of class or designation,
      including all substitutions therefor and replacements thereof, all proceeds
      thereof and all rights relating thereto, also including any certificates
      representing the Stock, the right to receive any certificates representing
      any
      of the Stock, all warrants, options, share appreciation rights and other rights,
      contractual or otherwise, in respect thereof, and the right to receive
      dividends, distributions of income, profits, surplus, or other compensation
      by
      way of income or liquidating distributions, in cash or in kind, and cash,
      instruments, and other property from time to time received, receivable, or
      otherwise distributed in respect of or in addition to, in substitution of,
      on
      account of, or in exchange for any or all of the foregoing.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (mm) “Pledged
      Operating Agreements”
means
      all of each Grantor’s rights, powers, and remedies under the limited liability
      company operating agreements of each of the Pledged Companies that are limited
      liability companies.

     

    (nn) “Pledged
      Partnership Agreements”
means
      all of each Grantor’s rights, powers, and remedies under the partnership
      agreements of each of the Pledged Companies that are partnerships.

     

    (oo) “PPSA”
means
      the Personal Property Security Act (Ontario), as in effect from time to
      time.

     

    (pp) “Proceeds”
has
      the
      meaning specified therefor in Section
      2.

     

    (qq) “Real
      Property”
means
      any estates or interests in real property now owned or hereafter acquired by
      any
      Grantor and the improvements thereto.

     

    (rr) “Records”
means
      information that is inscribed on a tangible medium or which is stored in an
      electronic or other medium and is retrievable in perceivable form.

     

    (ss) “Secured
      Obligations”
mean
      all of the present and future payment and performance obligations of Grantors
      arising under this Agreement, the Notes, the Guaranties, and the other
      Transaction Documents, including, without duplication, reasonable attorneys’
fees and expenses and any interest, fees, or expenses that accrue after the
      filing of an Insolvency Proceeding, regardless of whether allowed or allowable
      in whole or in part as a claim in any Insolvency Proceeding.

     

    (tt) “Securities
      Account”
means
      a
      securities account (as that term is defined in the Code).

     

    (uu) “Security
      Documents”
means,
      collectively, this Agreement, each Copyright Security Agreement, each Patent
      Security Agreement, each Trademark Security Agreement, each Control Agreement,
      and each other security agreement, pledge agreement, assignment, mortgage,
      security deed, deed of trust, and other agreement or document executed and
      delivered by a Grantor as security for any of the Secured Obligations.

     

    (vv) “Security
      Interest”
and
      “Security
      Interests”
have
      the meanings specified therefor in Section
      2.

     

    (ww) “Significant
      Secured Party”
means,
      on any date of determination, any Secured Party holding twenty five percent
      (25%) or more of the aggregate principal amount of Notes outstanding on such
      date.

     

    (xx) “Special
      Warrant”
has
      the
      meaning specified therefor in the Exchange Agreements.

     

    (yy) “Stock”
means
      all shares, options, warrants, interests (including membership and partnership
      interests), participations, or other equivalents (regardless of how designated)
      of or in a Person, whether voting or nonvoting, including common stock,
      preferred stock, or any other “equity security” (as such term is defined in Rule
      3a11-1 of the General Rules and Regulations promulgated by the United States
      Securities and Exchange Commission and any successor thereto under the
      Securities Exchange Act of 1934, as in effect from time to
      time).

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (zz) “Supporting
      Obligations”
means
      supporting obligations (as such term is defined in the Code).

     

    (aaa) “Trademarks”
means
      trademarks, trade names, trademark applications, service marks, service mark
      applications, and also includes (i) the trade names, trademarks, trademark
      applications, service marks, and service mark applications listed on
Schedule
      6
      attached
      hereto and made a part hereof, and (ii) all renewals thereof, (iii) all income,
      royalties, damages and payments now and hereafter due or payable under and
      with
      respect thereto, including payments under all licenses entered into in
      connection therewith and damages and payments for past or future infringements
      or dilutions thereof, (iv) the right to sue for past, present and future
      infringements and dilutions thereof, (v) the goodwill of each Grantor’s business
      symbolized by the foregoing or connected therewith, and (vi) all of each
      Grantor’s rights corresponding thereto throughout the world.

     

    (bbb) “Trademark
      Security Agreement”
means
      each Trademark Security Agreement among Grantors and Secured Parties in
      substantially the form of Exhibit
      C
      attached
      hereto, pursuant to which Grantors have granted to each Secured Party a security
      interest in all their respective Trademarks.

     

    (ccc) “Transaction
      Documents”
has
      the
      meaning specified therefor in the Notes.

     

    (ddd) “URL”
means
      “uniform resource locator,” an internet web address.

     

    (eee) “Veto
      Notice”
means,
      with respect to any Commencement Notice, a written notice given by any
      Significant Secured Party to the other Secured Parties in accordance with the
      notice provisions set forth in the Transaction Agreement pursuant to which
      such
      Significant Secured Party notifies the other Secured Parties of its objection
      to
      the commencement of the remedial action specified in such Commencement Notice
      and certifies that, to the best of its knowledge, it is a Significant Secured
      Party.

     

    (fff) “Veto
      Period”
means,
      with respect to any Commencement Notice, the period of ten (10) consecutive
      calendar days following the delivery of such Commencement Notice to the Secured
      Parties.

     

    (ggg) “Warrant”
has
      the
      meaning specified therefor in the Exchange Agreements.

     

    2. Grant
      of Security.
      Each
      Grantor hereby unconditionally grants, assigns, and pledges to each Secured
      Party a separate, continuing security interest (each, a “Security
      Interest”
and,
      collectively, the “Security
      Interests”)
      in all
      assets of such Grantor (other than real property) whether now owned or hereafter
      acquired or arising and wherever located, including, without limitation, such
      Grantor’s right, title, and interest in and to the following, whether now owned
      or hereafter acquired or arising and wherever located (collectively, the
“Collateral”):

     

    (a) all
      of
      such Grantor’s Accounts;

     

    (b) all
      of
      such Grantor’s Books;

     

    (c) all
      of
      such Grantor’s Chattel Paper;

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (d) all
      of
      such Grantor’s Deposit Accounts;

     

    (e) all
      of
      such Grantor’s Equipment and fixtures;

     

    (f) all
      of
      such Grantor’s General Intangibles;

     

    (g) all
      of
      such Grantor’s Inventory;

     

    (h) all
      of
      such Grantor’s Investment Related Property; 

     

    (i) all
      of
      such Grantor’s Negotiable Collateral;

     

    (j) all
      of
      such Grantor’s rights in respect of Supporting Obligations;

     

    (k) all
      of
      such Grantor’s Commercial Tort Claims;

     

    (l) all
      of
      such Grantor’s money, cash, cash equivalents, or other assets of each such
      Grantor that now or hereafter come into the possession, custody, or control
      of
      any Secured Party;

     

    (m) all
      of
      the proceeds and products, whether tangible or intangible, of any of the
      foregoing, including proceeds of insurance or Commercial Tort Claims covering
      or
      relating to any or all of the foregoing, and any and all Accounts, Books,
      Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory,
      Investment Related Property, Negotiable Collateral, Supporting Obligations,
      money, or other tangible or intangible property resulting from the sale, lease,
      license, exchange, collection, or other disposition of any of the foregoing,
      the
      proceeds of any award in condemnation with respect to any of the foregoing,
      any
      rebates or refunds, whether for taxes or otherwise, and all proceeds of any
      such
      proceeds, or any portion thereof or interest therein, and the proceeds thereof,
      and all proceeds of any loss of, damage to, or destruction of the above, whether
      insured or not insured, and, to the extent not otherwise included, any
      indemnity, warranty, or guaranty payable by reason of loss or damage to, or
      otherwise with respect to any of the foregoing (the “Proceeds”).
      Without limiting the generality of the foregoing, the term "Proceeds" includes
      whatever is receivable or received when Investment Related Property or proceeds
      are sold, exchanged, collected, or otherwise disposed of, whether such
      disposition is voluntary or involuntary, and includes proceeds of any indemnity
      or guaranty payable to any Grantor or any Secured Party from time to time with
      respect to any of the Investment Related Property.

     

    3. Security
      for Obligations.
      This
      Agreement and the Security Interests created hereby secure the payment and
      performance of the Secured Obligations, whether now existing or arising
      hereafter. Without limiting the generality of the foregoing, this Agreement
      secures the payment of all amounts which constitute part of the Secured
      Obligations and would be owed by Grantors, or any of them, to Secured Parties,
      or any of them, but for the fact that they are unenforceable or not allowable
      due to the existence of an Insolvency Proceeding involving any Grantor.

     

    4. Grantors
      Remain Liable.
      Anything herein to the contrary notwithstanding, (a) each of the Grantors shall
      remain liable under the contracts and agreements included in the Collateral,
      including the Pledged Operating Agreements and the Pledged Partnership
      Agreements, to perform all of the duties and obligations thereunder to the
      same
      extent as if this Agreement had not been executed, (b) the exercise by Secured
      Parties, or any of them, of any of the rights hereunder shall not release any
      Grantor from any of its duties or obligations under such contracts and
      agreements included in the Collateral, and (c) no Secured Party shall have
      any
      obligation or liability under such contracts and agreements included in the
      Collateral by reason of this Agreement, nor shall any Secured Party be obligated
      to perform any of the obligations or duties of any Grantor thereunder or to
      take
      any action to collect or enforce any claim for payment assigned hereunder.
      Until
      an Event of Default shall occur and be continuing, except as otherwise provided
      in this Agreement or any other Transaction Document, Grantors shall have the
      right to possession and enjoyment of the Collateral for the purpose of
      conducting the ordinary course of their respective businesses, subject to and
      upon the terms hereof and the other Transaction Documents. Without limiting
      the
      generality of the foregoing, it is the intention of the parties hereto that
      record and beneficial ownership of the Pledged Interests, including all voting,
      consensual, and dividend rights, shall remain in the applicable Grantor until
      the occurrence of an Event of Default and until any Secured Party shall notify
      the applicable Grantor of such Secured Party’s exercise of voting, consensual,
      or dividend rights with respect to the Pledged Interests pursuant to
Section
      15
      hereof.

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    5. Representations
      and Warranties.
      Each
      Grantor hereby represents and warrants as follows:

     

    (a) The
      exact
      legal name of each of the Grantors is set forth on the signature pages of this
      Agreement.

     

    (b) Schedule
      7
      attached
      hereto sets forth (i) all Real Property owned or leased by Grantors, together
      with all other location of Collateral, as of the date hereof, and (ii) the
      chief
      executive office of each Grantor as of the date hereof.

     

    (c) As
      of the
      date hereof, no Grantor has any interest in, or title to, any Copyrights,
      Intellectual Property Licenses, Patents, or Trademarks except as set forth
      on
Schedules
      2, 3, 4
      and
6,
      respectively, attached hereto. This Agreement is effective to create a valid
      and
      continuing Lien on such Copyrights, Intellectual Property Licenses, Patents
      and
      Trademarks and, upon filing of the Copyright Security Agreement with the United
      States Copyright Office and filing of the Patent Security Agreement and the
      Trademark Security Agreement with the United States Patent and Trademark Office,
      and the filing of appropriate financing statements in the jurisdictions listed
      on Schedule
      8
      hereto,
      all action necessary or desirable to protect and perfect the Security Interests
      in and to each Grantor’s Patents, Trademarks, or Copyrights has been taken and
      such perfected Security Interests are enforceable as such as against any and
      all
      creditors of and purchasers from any Grantor. No Grantor has any interest in
      any
      Copyright that is material to the operation of such Grantor’s business, except
      for those Copyrights identified on Schedule
      2
      attached
      hereto which have been registered with the United States Copyright
      Office.

     

    (d) This
      Agreement creates a valid security interest in all of the Collateral of each
      Grantor, to the extent a security interest therein can be created under the
      Code
      or the PPSA, as applicable, securing the payment of the Secured Obligations.
      Except to the extent a security interest in the Collateral cannot be perfected
      by the filing of a financing statement under the Code or the PPSA, all filings
      and other actions necessary or desirable to perfect and protect such security
      interest have been duly taken or will have been taken upon the filing of
      financing statements listing each applicable Grantor, as a debtor, and Secured
      Parties, as secured parties, in the jurisdictions listed next to such Grantor’s
      name on Schedule
      8
      attached
      hereto. Upon the making of such filings, Secured Parties shall each have a
      first
      priority perfected security interest in all of the Collateral of each Grantor
      to
      the extent such security interest can be perfected by the filing of a financing
      statement. All action by any Grantor necessary to protect and perfect such
      security interest on each item of Collateral has been duly taken. 

     

    (e) (i)
      Except for the Security Interests created hereby or as otherwise provided
      herein, such Grantor is and will at all times be the sole holder of record
      and
      the legal and beneficial owner, free and clear of all Liens other than Permitted
      Liens, of the Pledged Interests indicated on Schedule
      5
      as being
      owned by such Grantor and, when acquired by such Grantor, any Pledged Interests
      acquired after the date hereof; (ii) all of the Pledged Interests are duly
      authorized, validly issued, fully paid and nonassessable and the Pledged
      Interests constitute or will constitute the percentage of the issued and
      outstanding Stock of the Pledged Companies of such Grantor identified on
Schedule
      5
      hereto;
      (iii) such Grantor has the right and requisite authority to pledge all
      Investment Related Property pledged by such Grantor to each Secured Party as
      provided herein; (iv) all actions necessary or desirable to perfect, establish
      the first priority of, or otherwise protect, Secured Parties’ respective Liens
      in the Investment Related Property pledged hereunder, and the proceeds thereof,
      have been duly taken, (A) upon the execution and delivery of this Agreement;
      (B)
      upon the taking of possession by any Secured Party of any certificates
      constituting the Pledged Interests, to the extent such Pledged Interests are
      represented by certificates, together with undated powers endorsed in blank
      by
      the applicable Grantor; (C) upon the filing of financing statements in the
      applicable jurisdiction set forth on Schedule
      8
      attached
      hereto for such Grantor with respect to the Pledged Interests of such Grantor
      that are not represented by certificates, and (D) with respect to any Securities
      Accounts, upon the delivery of Control Agreements with respect thereto; and
      (v)
      each Grantor has delivered to and deposited with any Secured Party (or, with
      respect to any Pledged Interests created or obtained after the date hereof,
      will
      deliver and deposit in accordance with Sections
      6(a)
      and
8
      hereof)
      all certificates representing the Pledged Interests owned by such Grantor to
      the
      extent such Pledged Interests are represented by certificates, and undated
      powers endorsed in blank with respect to such certificates. None of the Pledged
      Interests owned or held by such Grantor has been issued or transferred in
      violation of any securities registration, securities disclosure, or similar
      laws
      of any jurisdiction to which such issuance or transfer may be
      subject.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (f) No
      consent, approval, authorization, or other order or other action by, and no
      notice to or filing with, any Governmental Authority or any other Person is
      required (i) for the grant of a Security Interest by such Grantor in and to
      the
      Collateral pursuant to this Agreement or for the execution, delivery, or
      performance of this Agreement by such Grantor, or (ii) for the exercise by
      any
      Secured Party of the voting or other rights provided in this Agreement with
      respect to Investment Related Property pledged hereunder or the remedies in
      respect of the Collateral pursuant to this Agreement, except (A) as may be
      required in connection with such disposition of Investment Related Property
      by
      laws affecting the offering and sale of securities generally and (B) for any
      consent that may be required for the assignment of any Intellectual Property
      License that expressly provides that such Intellectual Property License is
      not
      assignable (or is not assignable without the consent of the other party to
      such
      Intellectual Property License).

     

    6. Covenants.
      Each
      Grantor, jointly and severally, covenants and agrees with each Secured Party
      that from and after the date of this Agreement and until the date of termination
      of this Agreement in accordance with Section
      24
      hereof
      (but only to the extent the particular assets described in this Section 6
      constitute Collateral hereunder):

     

    (a) Possession
      of Collateral.
      In the
      event that any Collateral, including proceeds, is evidenced by or consists
      of
      Negotiable Collateral, Investment Related Property, or Chattel Paper, and if
      and
      to the extent that perfection or priority of Secured Parties’ respective
      Security Interests is dependent on or enhanced by possession, the applicable
      Grantor, immediately upon the request of any Secured Party, shall execute such
      other documents and instruments as shall be reasonably requested by such Secured
      Party or, if applicable, endorse and deliver physical possession of such
      Negotiable Collateral, Investment Related Property, or Chattel Paper to such
      Secured Party, together with such undated powers endorsed in blank as shall
      be
      reasonably requested by such Secured Party. 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (b) Chattel
      Paper.

     

    (i) Each
      Grantor shall take all steps reasonably necessary to grant each Secured Party
      control of all Chattel Paper in accordance with the Code and the PPSA and all
      “transferable records” as that term is defined in Section 16 of the Uniform
      Electronic Purchase Act and Section 201 of the federal Electronic Signatures
      in
      Global and National Commerce Act as in effect in any relevant jurisdiction;
      and

     

    (ii) If
      any
      Grantor retains possession of any Chattel Paper or instruments (which retention
      of possession shall be subject to the extent permitted hereby and by the
      Exchange Agreements), promptly upon the request of any Secured Party, such
      Chattel Paper and instruments shall be marked with the following legend: “This
      writing and the obligations evidenced or secured hereby are subject to the
      Security Interests of [names of Secured Parties]”.

     

    (c) Control
      Agreements.
      

     

    (i) Each
      Grantor shall obtain an authenticated Control Agreement from each bank
      maintaining a Deposit Account for such Grantor; and

     

    (ii) Upon
      request of any Secured Party, each Grantor shall obtain authenticated Control
      Agreements from each issuer of uncertificated securities, securities
      intermediary, or commodities intermediary issuing or holding any financial
      assets or commodities to or for such Grantor.

     

    (d) Letter-of-Credit
      Rights.
      Each
      grantor that is or becomes the beneficiary of a letter of credit, such Grantor
      shall promptly (and in any event within 2 Business Days after becoming a
      beneficiary) notify Secured Parties thereof and, upon the request by any Secured
      Party, as soon as reasonably practicable enter into a multi-party agreement
      with
      Secured Parties and the issuing or confirming bank with respect to
      letter-of-credit rights assigning such letter-of-credit rights to Secured
      Parties and directing all payments thereunder to Secured Parties, all in form
      and substance reasonably satisfactory to Secured Parties.

     

    (e) Commercial
      Tort Claims.
      Each
      Grantor shall promptly (and in any event within 2 Business Days of receipt
      thereof) notify Secured Parties in writing upon incurring or otherwise obtaining
      a Commercial Tort Claim with a potential value in excess of $100,000 after
      the
      date hereof and, upon request of any Secured Party, promptly amend Schedule
      1
      to this
      Agreement to describe such after-acquired Commercial Tort Claim in a manner
      that
      reasonably identifies such Commercial Tort Claim, and hereby authorizes the
      filing of additional financing statements or amendments to existing financing
      statements describing such Commercial Tort Claims, and agrees to do such other
      acts or things deemed necessary or desirable by any Secured Party to give
      Secured Parties a first priority, perfected security interest in any such
      Commercial Tort Claim.

     

    (f) Government
      Contracts.
      If any
      Account or Chattel Paper arises out of a contract or contracts with the United
      States of America, the federal or any provincial government of Canada, or any
      department, agency, or instrumentality of either such government, Grantors
      shall
      promptly (and in any event within 2 Business Days of the creation thereof)
      notify Secured Parties thereof in writing and execute any instruments or take
      any steps reasonably required by any Secured Party under the Assignment of
      Claims Act or other applicable law to provide each Secured Party a
      first-priority perfected Security Interest in such contract.

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (g) Intellectual
      Property.
      

     

    (i) Upon
      request of any Secured Party, in order to facilitate filings with the United
      States Patent and Trademark Office and the United States Copyright Office or
      any
      other applicable Governmental Authority, each Grantor shall execute and deliver
      to Secured Parties one or more Copyright Security Agreements, Trademark Security
      Agreements, or Patent Security Agreements to further evidence Secured Parties’
respective Liens on such Grantor’s Copyrights, Trademarks or
      Patents;

     

    (ii) Each
      Grantor shall have the duty to take all reasonable and necessary action to
      preserve and maintain all of each Grantor’s Trademarks, Patents, Copyrights,
      Intellectual Property Licenses, and its rights therein, including the filing
      of
      applications for renewal, affidavits of use, affidavits of noncontestability
      and
      opposition and interference and cancellation proceedings. In the event that
      any
      material Intellectual Property is infringed, misappropriated or diluted by
      a
      third party, Guarantor shall (A) take such actions as Guarantor shall reasonably
      deem appropriate under the circumstances to protect such Intellectual Property
      and (B) promptly notify the Secured Parties after it learns thereof and sue
      for
      infringement, misappropriation or dilution, to seek injunctive relief where
      appropriate and to recover any and all damages for such infringement,
      misappropriation or dilution. Any expenses incurred in connection with the
      foregoing shall be borne by Grantors. Each Grantor further agrees not to abandon
      any Trademark, Patent, Copyright, or Intellectual Property License;

     

    (iii) Grantors
      acknowledge and agree that Secured Parties shall have no duties with respect
      to
      the Trademarks, Patents, Copyrights, or Intellectual Property Licenses. Without
      limiting the generality of this Section
      6(g),
      Grantors acknowledge and agree that no Secured Party shall be under any
      obligation to take any steps necessary to preserve rights in the Trademarks,
      Patents, Copyrights, or Intellectual Property Licenses against any other Person,
      but any Secured Party may do so at its option from and after the occurrence
      and
      during the continuance of an Event of Default, and all expenses incurred in
      connection therewith (including reasonable fees and expenses of attorneys and
      other professionals) shall be for the sole account of the Grantors and shall
      be
      deemed to be Secured Obligations.

     

    (h) Investment
      Related Property.
      

     

    (i) If
      any
      Grantor shall receive or become entitled to receive any Pledged Interests after
      the date hereof, it shall promptly (and in any event within 2 Business Days
      of
      receipt thereof) identify such Pledged Interests in a written notice to Secured
      Parties;

     

    (ii) Each
      Grantor shall promptly deliver to Secured Parties a copy of each notice or
      other
      communication received by it in respect of any Pledged Interests;

     

    (iii) No
      Grantor shall make or consent to any material amendment or other modification
      or
      waiver with respect to any Pledged Interests, Pledged Operating Agreement,
      or
      Pledged Partnership Agreement, or enter into any agreement or permit to exist
      any restriction with respect to any Pledged Interests other than as permitted
      herein or pursuant to the Exchange Agreements;

     

    (iv) Each
      Grantor agrees that it will cooperate with Secured Parties in obtaining all
      necessary approvals and making all necessary filings under federal, state,
      local, or foreign law in connection with the Security Interests on the
      Investment Related Property pledged hereunder or any sale or transfer thereof;
      and

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (v) As
      to all
      limited liability company or partnership interests issued under any Pledged
      Operating Agreement or Pledged Partnership Agreement, each Grantor hereby
      represents, warrants and covenants that the Pledged Interests issued pursuant
      to
      such agreement (A) are not and shall not be dealt in or traded on securities
      exchanges or in securities markets, (B) do not and will not constitute
      investment company securities, and (C) are not and will not be held by such
      Grantor in a securities account. In addition, none of the Pledged Operating
      Agreements, the Pledged Partnership Agreements, or any other agreements
      governing any of the Pledged Interests issued under any Pledged Operating
      Agreement or Pledged Partnership Agreement, provide or shall provide that such
      Pledged Interests are securities governed by Article 8 of the Uniform Commercial
      Code as in effect in any relevant jurisdiction.

     

    (i) Transfers
      and Other Liens.
      Grantors shall not (i) sell, assign (by operation of law or otherwise) or
      otherwise dispose of, or grant any option with respect to, any of the
      Collateral, except as expressly permitted by this Agreement and the other
      Transaction Documents, or (ii) create or permit to exist any Lien upon or with
      respect to any of the Collateral of any of Grantors, except for Permitted Liens.
      The inclusion of Proceeds in the Collateral shall not be deemed to constitute
      consent by any Secured Party to any sale or other disposition of any of the
      Collateral except as expressly permitted in this Agreement or the other
      Transaction Documents. Notwithstanding anything contained in this Agreement
      to
      the contrary, Permitted Liens shall not be permitted with respect to any Pledged
      Interests.

     

    (j) Other
      Actions as to Any and All Collateral.
      Each
      Grantor shall promptly (and in any event within 2 Business Days of acquiring
      or
      obtaining such Collateral) notify Secured Parties in writing upon (i) acquiring
      or otherwise obtaining any Collateral after the date hereof consisting of
      Trademarks, Patents, registered Copyrights, Intellectual Property Licenses,
      Investment Related Property, Chattel Paper (electronic, tangible or otherwise),
      documents (as defined in Article 9 of the Code), promissory notes (as defined
      in
      the Code, or instruments (as defined in the Code) or (ii) any amount payable
      under or in connection with any of the Collateral being or becoming evidenced
      after the date hereof by any Chattel Paper, documents, promissory notes, or
      instruments and, in each such case upon the request of any Secured Party,
      promptly execute such other documents, or if applicable, deliver such Chattel
      Paper, other documents or certificates evidencing any Investment Related
      Property and do such other acts or things deemed reasonably necessary or
      desirable by any Secured Party to protect Secured Parties’ respective Security
      Interests therein. 

     

    7. Relation
      to Other Transaction Documents.
      The
      provisions of this Agreement shall be read and construed with the Transaction
      Documents referred to below in the manner so indicated.

     

    (a) Exchange
      Agreements and Notes.
      In the
      event of any conflict between any provision in this Agreement and a provision
      in
      the Exchange Agreements or Notes, such provision of the Exchange Agreements
      or
      Notes shall control, except to the extent the applicable provision in this
      Agreement is more restrictive with respect to the rights of Grantors or imposes
      more burdensome or additional obligations on Grantors, in which event the
      applicable provision in this Agreement shall control.

     

    (b) Patent,
      Trademark, Copyright Security Agreements.
      The
      provisions of the Copyright Security Agreements, Trademark Security Agreements,
      and Patent Security Agreements are supplemental to the provisions of this
      Agreement, and nothing contained in the Copyright Security Agreements, Trademark
      Security Agreements or the Patent Security Agreements shall limit any of the
      rights or remedies of any Secured Party hereunder. 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    8. Further
      Assurances.
      

     

    (a) Each
      Grantor agrees that from time to time, at its own expense, such Grantor will
      promptly execute and deliver all further instruments and documents, and take
      all
      further action, that may be necessary or that any Secured Party may reasonably
      request, in order to perfect and protect the Security Interests granted or
      purported to be granted hereby or to enable any Secured Party to exercise and
      enforce its rights and remedies hereunder with respect to any of the Collateral.
      

     

    (b) Each
      Grantor authorizes the filing by any Secured Party of financing or continuation
      statements, or amendments thereto, and such Grantor will execute and deliver
      to
      such Secured Party such other instruments or notices, as may be necessary or
      as
      such Secured Party may reasonably request, in order to perfect and preserve
      the
      Security Interests granted or purported to be granted hereby. 

     

    (c) Each
      Grantor authorizes any Secured Party at any time and from time to time to file,
      transmit, or communicate, as applicable, financing statements and amendments
      (i)
      describing the Collateral as “all personal property of debtor” or “all assets of
      debtor” or words of similar effect, (ii) describing the Collateral as being of
      equal or lesser scope or with greater detail, or (iii) that contain any
      information required by part 5 of Article 9 of the Code for the sufficiency
      or
      filing office acceptance. 

     

    (d) Each
      Grantor acknowledges that it is not authorized to file any financing statement
      or amendment or termination statement with respect to any financing statement
      filed in connection with this Agreement without the prior written consent of
      each Secured Party affected thereby, subject to such Grantor’s rights under
      Section 9-509(d)(2) of the Code.

     

    (e) Parent
      agrees that, within 60 days after the date hereof, Parent shall take all actions
      as may be necessary or appropriate in order to extend its business registration
      in British Columbia, Canada and provide Secured Parties with satisfactory
      written evidence of such extension.

     

    9. Secured
      Parties’ Right to Perform Contracts, Exercise Rights, etc.
      Upon
      the occurrence and during the continuance of an Event of Default, any Secured
      Party (a) may proceed to perform any and all of the obligations of any Grantor
      contained in any contract, lease, or other agreement and exercise any and all
      rights of any Grantor therein contained as fully as such Grantor itself could,
      (b) shall have the right to use any Grantor’s rights under Intellectual Property
      Licenses in connection with the enforcement of the Secured Party’s rights
      hereunder, including the right to prepare for sale and sell any and all
      Inventory and Equipment now or hereafter owned by any Grantor and now or
      hereafter covered by such licenses, and (c) shall have the right to request
      that
      any Stock that is pledged hereunder be registered in the name of such Secured
      Party or any of its nominees.

     

    10. Secured
      Parties Appointed Attorney-in-Fact.
      Each
      Grantor, on behalf of itself and each New Subsidiary of such Grantor, hereby
      irrevocably appoints each Secured Party as the attorney-in-fact of such Grantor
      and each such New Subsidiary for the sole purpose of carrying out the terms
      of,
      and to accomplish the purposes of, this Agreement. In the event any Grantor
      or
      New Subsidiary fails to execute or deliver in a timely manner any Transaction
      Document which such Grantor or New Subsidiary now or at any time hereafter
      is
      required to execute or deliver pursuant to the terms of the Exchange Agreements
      or any other Transaction Document, each Secured Party shall have full authority
      in the place and stead of such Grantor or New Subsidiary, and in the name of
      such Grantor, such New Subsidiary or otherwise, to execute and deliver each
      such
      Transaction Document. Without limitation of the foregoing, each Secured Party
      shall have full authority in the place and stead of each Grantor and each New
      Subsidiary, and in the name of any such Grantor, any such New Subsidiary or
      otherwise, at such time as an Event of Default has occurred and is continuing,
      to take any action and to execute any instrument which such Secured Party may
      reasonably deem necessary or advisable to accomplish the purposes of this
      Agreement, including: 

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (a) to
      ask,
      demand, collect, sue for, recover, compromise, receive and give acquittance
      and
      receipts for moneys due and to become due under or in connection with any
      Collateral of such Grantor or New Subsidiary;

     

    (b) to
      receive and open all mail addressed to such Grantor or New Subsidiary and to
      notify postal authorities to change the address for the delivery of mail to
      such
      Grantor or New Subsidiary to that of such Secured Party;

     

    (c) to
      receive, indorse, and collect any drafts or other instruments, documents,
      Negotiable Collateral or Chattel Paper;

     

    (d) to
      file
      any claims or take any action or institute any proceedings which such Secured
      Party may deem reasonably necessary or desirable for the collection of any
      of
      the Collateral of such Grantor or New Subsidiary or otherwise to enforce the
      rights of any Secured Party with respect to any of the Collateral;

     

    (e) to
      repair, alter, or supply goods, if any, necessary to fulfill in whole or in
      part
      the purchase order of any Person obligated to such Grantor or New Subsidiary
      in
      respect of any Account of such Grantor or New Subsidiary; 

     

    (f) to
      use
      any labels, Patents, Trademarks, trade names, URLs, domain names, industrial
      designs, Copyrights, advertising matter or other industrial or intellectual
      property rights, in advertising for sale and selling Inventory and other
      Collateral and to collect any amounts due under Accounts, contracts or
      Negotiable Collateral of such Grantor or New Subsidiary; and

     

    (g) such
      Secured Party shall have the right, but shall not be obligated, to bring suit
      in
      its own name to enforce the Trademarks, Patents, Copyrights and Intellectual
      Property Licenses and, if such Secured Party shall commence any such suit,
      the
      appropriate Grantor or New Subsidiary shall, at the request of such Secured
      Party, do any and all lawful acts and execute any and all proper documents
      reasonably required by such Secured Party in aid of such enforcement.

     

    To
      the
      extent permitted by law, each Grantor hereby ratifies, for itself and each
      of
      its New Subsidiaries, all that such attorney-in-fact shall lawfully do or cause
      to be done by virtue hereof. This power of attorney is coupled with an interest
      and shall be irrevocable until this Agreement is terminated. 

     

    11. Secured
      Parties May Perform.
      If any
      Grantor fails to perform any agreement contained herein, any Secured Party
      may
      itself perform, or cause performance of, such agreement, and the reasonable
      expenses of such Secured Party incurred in connection therewith shall be
      payable, jointly and severally, by Grantors.

     

    12. Secured
      Parties’ Duties; Bailee for Perfection.
      The
      powers conferred on Secured Parties hereunder are solely to protect the Secured
      Parties’ respective interests in the Collateral and shall not impose any duty
      upon any Secured Party in favor of any Grantor or any other Secured Party to
      exercise any such powers. Except for the safe custody of any Collateral in
      its
      actual possession and the accounting for moneys actually received by it
      hereunder, no Secured Party shall have any duty to any Grantor or any other
      Secured Party as to any Collateral or as to the taking of any necessary steps
      to
      preserve rights against prior parties or any other rights pertaining to any
      Collateral. A Secured Party shall be deemed to have exercised reasonable care
      in
      the custody and preservation of any Collateral in its actual possession if
      such
      Collateral is accorded treatment substantially equal to that which such Secured
      Party accords its own property. Each Secured Party agrees that, with respect
      to
      any Collateral at any time or times in its possession and in which any other
      Secured Party has a Lien, the Secured Party in possession of any such Collateral
      shall be the bailee of each other Secured Party solely for purposes of
      perfecting (to the extent not otherwise perfected) each other Secured Party’s
      Lien in such Collateral, provided that no Secured Party shall be obligated
      to
      obtain or retain possession of any such Collateral. Without limiting the
      generality of the foregoing, Secured Parties and Grantors hereby agree that
      any
      Secured Party that is in possession of any Collateral at such time as the
      Secured Obligations owing to such Secured Party have been paid in full may
      re-deliver such Collateral to the applicable Grantor or, if requested by any
      Secured Party prior to such re-delivery, may deliver such Collateral (unless
      otherwise restricted by applicable law or court order and subject in all events
      to the receipt of an indemnification of all liabilities arising from such
      delivery) to the requesting Secured Party, without recourse to or representation
      or warranty by the Secured Party in such possession.

    
      
        
        

      

      
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    13. Collection
      of Accounts, General Intangibles and Negotiable Collateral.
      At any
      time upon the occurrence and during the continuation of an Event of Default,
      any
      Secured Party may (a) notify Account Debtors of any Grantor that the Accounts,
      General Intangibles, Chattel Paper or Negotiable Collateral have been assigned
      to such Secured Party or that such Secured Party has a security interest
      therein, and (b) collect the Accounts, General Intangibles and Negotiable
      Collateral directly, and any collection costs and expenses shall constitute
      part
      of the Secured Obligations.

     

    14. Disposition
      of Pledged Interests by Secured Party.
      None of
      the Pledged Interests existing as of the date of this Agreement are, and none
      of
      the Pledged Interests hereafter acquired on the date of acquisition thereof
      will
      be, registered or qualified under the various federal, state or other securities
      laws of the United States or any other jurisdiction, and disposition thereof
      after an Event of Default may be restricted to one or more private (instead
      of
      public) sales in view of the lack of such registration. Each Grantor understands
      that in connection with such disposition, any Secured Party may approach only
      a
      restricted number of potential purchasers and further understands that a sale
      under such circumstances may yield a lower price for the Pledged Interests
      than
      if the Pledged Interests were registered and qualified pursuant to federal,
      state and other securities laws and sold on the open market. Each Grantor,
      therefore, agrees that: (a) if a Secured Party shall, pursuant to the terms
      of
      this Agreement, sell or cause the Pledged Interests or any portion thereof
      to be
      sold at a private sale, such Secured Party shall have the right to rely upon
      the
      advice and opinion of any nationally recognized brokerage or investment firm
      (but shall not be obligated to seek such advice and the failure to do so shall
      not be considered in determining the commercial reasonableness of such action)
      as to the best manner in which to offer the Pledged Interest or any portion
      thereof for sale and as to the best price reasonably obtainable at the private
      sale thereof; and (b) such reliance shall be conclusive evidence that such
      Secured Party has handled the disposition in a commercially reasonable
      manner.

     

    15. Voting
      Rights.

     

    (a) Upon
      the
      occurrence and during the continuation of an Event of Default, (i) any Secured
      Party may, at its option, and with 2 Business Days prior notice to any Grantor,
      and in addition to all rights and remedies available to Secured Parties under
      any other agreement, at law, in equity, or otherwise, exercise all voting
      rights, and all other ownership or consensual rights in respect of the Pledged
      Interests owned by such Grantor, but under no circumstances is any Secured
      Party
      obligated by the terms of this Agreement to exercise such rights, and (ii)
      if
      such Secured Party duly exercises its right to vote any of such Pledged
      Interests, each Grantor hereby appoints such Secured Party as such Grantor’s
      true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged
      Interests in any manner that such Secured Party deems advisable for or against
      all matters submitted or which may be submitted to a vote of shareholders,
      partners or members, as the case may be. The power-of-attorney granted hereby
      is
      coupled with an interest and shall be irrevocable.

    
      
        
        

      

      
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    (b) For
      so
      long as any Grantor shall have the right to vote the Pledged Interests owned
      by
      it, such Grantor covenants and agrees that it will not, without the prior
      written consent of Secured Parties, vote or take any consensual action with
      respect to such Pledged Interests which would materially adversely affect the
      rights of Secured Parties exercising the voting rights owned by such Grantor
      or
      the value of the Pledged Interests.

     

    16. Remedies.
      Upon
      the occurrence and during the continuance of an Event of Default:

     

    (a) Any
      Secured Party may exercise in respect of the Collateral, in addition to other
      rights and remedies provided for herein, in the other Transaction Documents,
      or
      otherwise available to it, all the rights and remedies of a secured party on
      default under the Code, the PPSA or any other applicable law. Without limiting
      the generality of the foregoing, each Grantor expressly agrees that, in any
      such
      event, any Secured Party without any demand, advertisement, or notice of any
      kind (except a notice specified below of time and place of public or private
      sale) to or upon any Grantor or any other Person (all and each of which demands,
      advertisements and notices are hereby expressly waived to the maximum extent
      permitted by the Code or by any other applicable law), may take immediate
      possession of all or any portion of the Collateral and (i) require Grantors
      to,
      and each Grantor hereby agrees that it will at its own expense and upon request
      of such Secured Party forthwith, assemble all or part of the Collateral as
      directed by such Secured Party and make it available to such Secured Party
      at
      one or more locations where such Grantor regularly maintains Inventory, and
      (ii)
      without notice except as specified below, sell the Collateral or any part
      thereof in one or more parcels at public or private sale, at any of such Secured
      Party’s offices or elsewhere, for cash, on credit, and upon such other terms as
      such Secured Party may deem commercially reasonable. Each Grantor agrees that,
      to the extent notice of sale shall be required by law, at least 10 days notice
      to any Grantor of the time and place of any public sale or the time after which
      any private sale is to be made shall constitute reasonable notification and
      specifically such notice shall constitute a reasonable “authenticated
      notification of disposition” within the meaning of Section 9-611 of the Code. No
      Secured Party shall be obligated to make any sale of Collateral regardless
      of
      notice of sale having been given. Any Secured Party may adjourn any public
      or
      private sale from time to time by announcement at the time and place fixed
      therefor, and such sale may, without further notice, be made at the time and
      place to which it was so adjourned.

     

    (b) Any
      Secured Party may seek the appointment of a receiver, receiver-manager or keeper
      (a “Receiver”) under the laws of Canada or any Province thereof to take
      possession of all or any portion of the Collateral or to operate same and,
      to
      the maximum extent permitted by law, may seek the appointment of such a Receiver
      without the requirement of prior notice or a hearing. Any such Receiver shall,
      so far as concerns responsibility for his/her acts, be deemed agent of the
      applicable Grantor and not any Secured Party, and no Secured Party shall be
      in
      any way responsible for any misconduct, negligence or non-feasance on the part
      of any such Receiver, his/her servants or employees. Subject to the provisions
      of the instrument appointing him/her, any such Receiver shall have power to
      take
      possession of Collateral, to preserve Collateral or its value, to carry on
      or
      concur in carrying on all or any part of the business of the applicable Grantor,
      and to sell, lease, license or otherwise dispose of or concur in selling,
      leasing, licensing or otherwise disposing of Collateral. To facilitate the
      foregoing powers, any such Receiver may, to the exclusion of all others,
      including Grantors, enter upon, use and occupy all premises owned or occupied
      by
      Grantors wherein Collateral may be situated, maintain Collateral upon such
      premises, borrow money on a secured or unsecured basis, and use Collateral
      directly in carrying on Grantors’ business or as security for loans or advances
      to enable the Receiver to carry on Grantors’ business or otherwise, as such
      Receiver shall, in its discretion, determine. Except as may be otherwise
      directed by a Secured Party, all money received from time to time by such
      Receiver in carrying out his/her appointment shall be received in trust for
      and
      paid over to Secured Parties. Every such Receiver may, in the discretion of
      any
      Secured Party, be vested with all or any of the rights and powers of any Secured
      Party. Any Secured Party may, either directly or through its nominees, exercise
      any or all powers and rights given to a Receiver by virtue of the foregoing
      provisions of this paragraph.

    
      
        
        

      

      
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    (c) Each
      Secured Party is hereby granted a license or other right to use, without
      liability for royalties or any other charge, each Grantor’s labels, Patents,
      Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
      service marks and advertising matter, URLs, domain names, industrial designs,
      other industrial or intellectual property or any property of a similar nature,
      whether owned by any Grantor or with respect to which any Grantor has rights
      under license, sublicense, or other agreements (but only to the extent (i)
      such
      license, sublicense or agreement does not prohibit such use by such Secured
      Party and (ii) such Grantor will not be in default under such license,
      sublicense, or other agreement as a result of such use by such Secured Party),
      as it pertains to the Collateral, in preparing for sale, advertising for sale
      and selling any Collateral, and each Grantor’s rights under all licenses and all
      franchise agreements shall inure to the benefit of such Secured
      Party.

     

    (d) Any
      cash
      held by any Secured Party as Collateral and all proceeds received by any Secured
      Party in respect of any sale of, collection from, or other realization upon
      all
      or any part of the Collateral shall be applied against the Secured Obligations
      in the order set forth in Section 17 hereof. In the event the proceeds of
      Collateral are insufficient to satisfy all of the Secured Obligations in full,
      each Grantor shall remain jointly and severally liable for any such
      deficiency.

     

    (e) Each
      Grantor hereby acknowledges that the Secured Obligations arose out of a
      commercial transaction, and agrees that if an Event of Default shall occur
      and
      be continuing any Secured Party shall have the right to an immediate writ of
      possession without notice of a hearing. Without limitation of Section 16(b)
      hereof, each Secured Party shall have the right to the appointment of a receiver
      for the properties and assets of each Grantor, and each Grantor hereby consents
      to such rights and such appointment and hereby waives any objection such Grantor
      may have thereto or the right to have a bond or other security posted by any
      Secured Party.

     

    (f) Notwithstanding
      anything in this Agreement to the contrary, each Secured Party agrees that
      it
      will not exercise any remedy provided for under this Agreement with respect
      to
      all or any portion of the Collateral unless such Secured Party is a Permitted
      Secured Party (provided that the foregoing shall not prevent any Secured Party
      from commencing or participating in any Insolvency Proceeding or taking any
      action (other than with respect to the Collateral) to enforce the payment or
      performance of any Grantors’ obligations under any of the Notes, Guaranties or
      other Transaction Documents). This Section 16(f) is not intended to confer
      any
      rights or benefits upon Grantors, or any of them, or any other Person except
      Secured Parties, and no Person (including any or all Grantors) other than
      Secured Parties shall have any right to enforce any of the provisions of
      this Section 16(f). As between Grantors, or any of them, and any Secured
      Party, any action that such Secured Party may take under this Agreement shall
      be
      conclusively presumed to have been authorized and approved by the other Secured
      Parties. 

     

    17. Priority
      of Liens; Application of Proceeds of Collateral.
      Each
      Secured Party hereby acknowledges and agrees that, notwithstanding the time
      or
      order of the filing of any financing statement or other registration or document
      with respect to the Collateral and the Security Interests, or any provision
      of
      this Agreement, any other Security Document, the Code, the PPSA or other
      applicable law, solely as amongst the Secured Parties, the separate Security
      Interests of the Secured Parties shall have the same rank and priority;
      provided, that, the foregoing shall not apply to any Security Interest of a
      Secured Party that is void or voidable as a matter of law. In furtherance
      thereof, all proceeds of Collateral received by any Secured Party shall be
      applied as follows:

    
      
        
        

      

      
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    (a) first,
      ratably
      to pay any expenses due to any of the Secured Parties (including, without
      limitation, the reasonable costs and expenses paid or incurred by any Secured
      Party to correct any default under or enforce any provision of the Transaction
      Documents, or after the occurrence of any Event of Default in gaining possession
      of, maintaining, handling, preserving, storing, shipping, selling, preparing
      for
      sale, or advertising to sell the Collateral, or any portion thereof,
      irrespective of whether a sale is consummated) or indemnities then due to any
      of
      the Secured Parties under the Transaction Documents, until paid in
      full;

     

    (b) second,
      ratably
      to pay any fees or premiums then due to any of the Secured Parties under the
      Transaction Documents, until paid in full;

     

    (c) third,
      ratably
      to pay interest due in respect of the Secured Obligations then due to any of
      the
      Secured Parties, until paid in full;

     

    (d) fourth,
      ratably
      to pay the principal amount of all Secured Obligations then due to any of the
      Secured Parties, until paid in full;

     

    (e) fifth,
      ratably
      to pay any other Secured Obligations then due to any of the Secured Parties;
      and

     

    (f) sixth,
      to
      Grantors or such other Person entitled thereto under applicable
      law.

     

    18. Remedies
      Cumulative.
      Each
      right, power, and remedy of any Secured Party as provided for in this Agreement
      or in any Transaction Document or now or hereafter existing at law or in equity
      or by statute or otherwise shall be cumulative and concurrent and shall be
      in
      addition to every other right, power, or remedy provided for in this Agreement
      or in the Transaction Documents or now or hereafter existing at law or in equity
      or by statute or otherwise, and the exercise or beginning of the exercise by
      any
      Secured Party, of any one or more of such rights, powers, or remedies shall
      not
      preclude the simultaneous or later exercise by such Secured Party of any or
      all
      such other rights, powers, or remedies.

     

    19. Marshaling.
      No
      Secured Party shall be required to marshal any present or future collateral
      security (including but not limited to the Collateral) for, or other assurances
      of payment of, the Secured Obligations or any of them or to resort to such
      collateral security or other assurances of payment in any particular order,
      and
      all of its rights and remedies hereunder and in respect of such collateral
      security and other assurances of payment shall be cumulative and in addition
      to
      all other rights and remedies, however existing or arising. To the extent that
      it lawfully may, each Grantor hereby agrees that it will not invoke any law
      relating to the marshaling of collateral which might cause delay in or impede
      the enforcement of any Secured Party’s rights and remedies under this Agreement
      or under any other instrument creating or evidencing any of the Secured
      Obligations or under which any of the Secured Obligations is outstanding or
      by
      which any of the Secured Obligations is secured or payment thereof is otherwise
      assured, and, to the extent that it lawfully may, each Grantor hereby
      irrevocably waives the benefits of all such laws.

     

    20. Acknowledgment.

     

    (a) Each
      Secured Party hereby agrees and acknowledges that no other Secured Party has
      agreed to act for it as an administrative or collateral agent, and each Secured
      Party is and shall remain solely responsible for the attachment, perfection
      and
      priority of all Liens created by this Agreement or any other Security Document
      in favor of such Secured Party. No Secured Party shall have by reason of
      this Agreement or any other Transaction Document an agency or fiduciary
      relationship with any other Secured Party. No Secured Party (which term, as
      used
      in this sentence, shall include reference to each Secured Party’s officers,
      directors, employees, attorneys, agents and affiliates and to the officers,
      directors, employees, attorneys and agents of such Secured Party’s affiliates)
      shall: (i) have any duties or responsibilities except those expressly set
      forth in this Agreement and the other Security Documents or (ii) be
      required to take, initiate or conduct any enforcement action (including any
      litigation, foreclosure or collection proceedings hereunder or under any of
      the
      other Security Documents). Without limiting the foregoing, no Secured Party
      shall have any right of action whatsoever against any other Secured Party as
      a
      result of such Secured Party acting or refraining from acting hereunder or
      under
      any of the Security Documents except as a result and to the extent of losses
      caused by such Secured Party’s actual gross negligence or
      willful misconduct (it being understood and agreed by each Secured Party
      that the delivery by any Significant Secured Party of one or more Veto Notices
      shall not be deemed to be or construed as gross negligence or willful misconduct
      on the part of the Secured Party delivering any such Veto Notice). No Secured
      Party assumes any responsibility for any failure or delay in performance or
      breach by any Grantor or any Secured Party of its obligations under this
      Agreement or any other Transaction Document. No Secured Party makes to any
      other Secured Party any express or implied warranty, representation or guarantee
      with respect to any Secured Obligations, Collateral, Transaction Document or
      Grantor. No Secured Party nor any of its officers, directors, employees,
      attorneys or agents shall be responsible to any other Secured Party or any
      of
      its officers, directors, employees, attorneys or agents for: (i) any
      recitals, statements, information, representations or warranties contained
      in
      any of the Transaction Documents or in any certificate or other document
      furnished pursuant to the terms hereof; (ii) the execution, validity,
      genuineness, effectiveness or enforceability of any of the Transaction
      Documents; (iii) the validity, genuineness, enforceability, collectibility,
      value, sufficiency or existence of any Collateral, or the attachment, perfection
      or priority of any Lien therein; or (iv) the assets, liabilities, financial
      condition, results of operations, business, creditworthiness or legal status
      of
      any Grantor or any Account Debtor. No Secured Party nor any of its officers,
      directors, employees, attorneys or agents shall have any obligation to any
      other
      Secured Party to ascertain or inquire into the existence of any default or
      Event
      of Default, the observance or performance by any Grantor of any of the
      duties or agreements of such Grantor under any of the Transaction Documents
      or
      the satisfaction of any conditions precedent contained in any of the Transaction
      Documents.

    
      
        
        

      

      
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    (b) Each
      Secured Party hereby acknowledges and represents that it has, independently
      and
      without reliance upon any other Secured Party, and based upon such documents,
      information and analyses as it has deemed appropriate, made its own credit
      analysis of each Grantor and its own decision to enter into the Transaction
      Documents and to purchase Notes and Warrants, and each Secured Party has
      made such inquiries concerning the Transaction Documents, the Collateral and
      each Grantor as such Secured Party feels necessary and appropriate, and has
      taken such care on its own behalf as would have been the case had it entered
      into the Transaction Documents without any other Secured Party. Each Secured
      Party hereby further acknowledges and represents that the other Secured Parties
      have not made any representations or warranties to it concerning any Grantor,
      any of the Collateral or the legality, validity, sufficiency or enforceability
      of any of the Transaction Documents. Each Secured Party also hereby acknowledges
      that it will, independently and without reliance upon the other Secured Parties,
      and based upon such financial statements, documents and information as it deems
      appropriate at the time, continue to make and rely upon its own credit decisions
      in taking or refraining to take any other action under this Agreement or
      the Transaction Documents. No Secured Party shall have any duty or
      responsibility to provide any other Secured Party with any notices, reports
      or
      certificates furnished to such Secured Party by any Grantor or any credit or
      other information concerning the affairs, financial condition, business or
      assets of any Grantor (or any of its affiliates) which may come into possession
      of such Secured Party.

     

    21. Indemnity
      and Expenses.
      

     

    (a) Each
      Grantor agrees to indemnify all Secured Parties from and against all claims,
      lawsuits and liabilities (including reasonable attorneys’ fees) arising out of
      or resulting from a breach of this Agreement (including enforcement of this
      Agreement) or any other Transaction Document, except claims, losses or
      liabilities resulting from the gross negligence or willful misconduct of the
      party seeking indemnification as determined by a final non-appealable order
      of a
      court of competent jurisdiction. This provision shall survive the termination
      of
      this Agreement and the Transaction Documents and the repayment of the Secured
      Obligations.

    
      
        
        

      

      
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    (b) Grantors,
      jointly and severally, shall, upon demand, pay to each Secured Party all of
      the
      costs and expenses which such Secured Party may incur in connection with (i)
      the
      custody, preservation, use or operation of, or, upon an Event of Default, the
      sale of, collection from, or other realization upon, any of the Collateral
      in
      accordance with this Agreement and the Transaction Documents, or (ii) the
      exercise or enforcement of any of the rights of such Secured Party hereunder
      or
      (iii) the failure by any Grantor to perform or observe any of the provisions
      hereof.

     

    22. Merger,
      Amendments; Etc.
      THIS
      AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL
      AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
      CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
      UNWRITTEN AGREEMENTS BETWEEN THE PARTIES. No waiver of any provision of this
      Agreement, and no consent to any departure by any of Grantors herefrom, shall
      in
      any event be effective unless the same shall be in writing and signed by each
      Secured Party, and then such waiver or consent shall be effective only in the
      specific instance and for the specific purpose for which given. No amendment
      of
      any provision of this Agreement shall be effective unless the same shall be
      in
      writing and signed by each Secured Party and each Grantor to which such
      amendment applies.

     

    23. Addresses
      for Notices.
      All
      notices and other communications provided for hereunder (a) shall be given
      in
      the form and manner set forth in the Transaction Agreement and (b) shall be
      delivered, (i) in the case of notice to any Grantor, by delivery of such notice
      to Parent at Parent’s address specified in the Transaction Agreement or at such
      other address as shall be designated by Parent in a written notice to each
      of
      the Secured Parties in accordance with the provisions thereof, and (ii) in
      the
      case of notice to any Secured Party, by delivery of such notice to such Secured
      Party at its address specified in the Transaction Agreement or at such other
      address as shall be designated by such Secured Party in a written notice to
      Parent and each other Secured Party in accordance with the provisions
      thereof.

     

    24. Separate,
      Continuing Security Interests; Assignments under Transaction
      Documents.
      This
      Agreement shall create a separate, continuing security interest in the
      Collateral in favor of each Secured Party and shall (a) remain in full force
      and
      effect until the Secured Obligations have been paid in full in cash in
      accordance with the provisions of the Transaction Documents, (b) be binding
      upon
      each of Grantors, and their respective successors and assigns, and (c) inure
      to
      the benefit of, and be enforceable by, the Secured Parties and their respective
      successors, transferees and assigns. Without limiting the generality of the
      foregoing clause (c), any Secured Party may, in accordance with the provisions
      of the Transaction Documents, assign or otherwise transfer all or any portion
      of
      its rights and obligations under the Transaction Documents to any other Person,
      and such other Person shall thereupon become vested with all the benefits in
      respect thereof granted to such Secured Party herein or otherwise. Upon payment
      in full in cash of the Secured Obligations in accordance with the provisions
      of
      the Transaction Documents, the Security Interests granted hereby shall terminate
      and all rights to the Collateral shall revert to Grantors or any other Person
      entitled thereto. At such time, each Secured Party will authorize the filing
      of
      appropriate termination statements to terminate such Security Interests. No
      transfer or renewal, extension, assignment, or termination of this Agreement
      or
      any other Transaction Document, or any other instrument or document executed
      and
      delivered by any Grantor to any Secured Party nor any additional loans made
      by
      any Secured Party to any Grantor, nor the taking of further security, nor the
      retaking or re-delivery of the Collateral to Grantors, or any of them, by any
      Secured Party, nor any other act of Secured Parties, or any of them, shall
      release any of Grantors from any obligation, except a release or discharge
      executed in writing by all Secured Parties. No Secured Party shall by any act,
      delay, omission or otherwise, be deemed to have waived any of its rights or
      remedies hereunder, unless such waiver is in writing and signed by such Secured
      Party and then only to the extent therein set forth. A waiver by any Secured
      Party of any right or remedy on any occasion shall not be construed as a bar
      to
      the exercise of any such right or remedy which such Secured Party would
      otherwise have had on any other occasion.

    
      
        
        

      

      
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    25. Governing
      Law; Jurisdiction; Service of Process; Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of
      Illinois, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of Illinois or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of Illinois. Each party hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the City of Chicago,
      Illinois for the adjudication of any dispute hereunder or in connection herewith
      or with any transaction contemplated hereby or discussed herein, and hereby
      irrevocably waives, and agrees not to assert in any suit, action or proceeding,
      any claim that it is not personally subject to the jurisdiction of any such
      court, that such suit, action or proceeding is brought in an inconvenient forum
      or that the venue of such suit, action or proceeding is improper; provided,
      however,
      that
      any suit seeking enforcement against any Collateral or other property may be
      brought, at any Secured Party’s option, in the courts of any jurisdiction where
      such Secured Party elects to bring such action or where such Collateral or
      other
      property may be found. Each party hereby irrevocably waives personal service
      of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof to such party at the address for such
      notices to it under this Agreement and agrees that such service shall constitute
      good and sufficient service of process and notice thereof. Without limitation
      of
      the foregoing, each Grantor other than Parent hereby irrevocably appoints Parent
      as such Grantor’s agent for purposes of receiving and accepting any service of
      process hereunder or under any of the other Security Documents. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
      HEREBY. 

     

    26. Miscellaneous.

     

    (a) This
      Agreement may be executed in any number of counterparts and by different parties
      on separate counterparts, each of which, when executed and delivered, shall
      be
      deemed to be an original, and all of which, when taken together, shall
      constitute but one and the same Agreement. Delivery of an executed counterpart
      of this Agreement by telefacsimile or other electronic method of transmission
      shall be equally as effective as delivery of an original executed counterpart
      of
      this Agreement. Any party delivering an executed counterpart of this Agreement
      by telefacsimile or other electronic method of transmission also shall deliver
      an original executed counterpart of this Agreement but the failure to deliver
      an
      original executed counterpart shall not affect the validity, enforceability,
      and
      binding effect of this Agreement. The foregoing shall apply to each other
      Security Document mutatis
      mutandis.

     

    (b) 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 in that jurisdiction or affecting
      the validity or enforceability of such provision in any other
      jurisdiction.

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (c) Headings
      used in this Agreement are for convenience only and shall not be used in
      connection with the interpretation of any provision hereof.

     

    (d) The
      pronouns used herein shall include, when appropriate, either gender and both
      singular and plural, and the grammatical construction of sentences shall conform
      thereto.

     

    (e) Unless
      the context of this Agreement or any other Transaction Document clearly requires
      otherwise, references to the plural include the singular, references to the
      singular include the plural, the terms “includes” and “including” are not
      limiting, and the term “or” has, except where otherwise indicated, the inclusive
      meaning represented by the phrase “and/or.” The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement or any other
      Transaction Document refer to this Agreement or such other Transaction Document,
      as the case may be, as a whole and not to any particular provision of this
      Agreement or such other Transaction Document, as the case may be. Section,
      subsection, clause, schedule, and exhibit references herein are to this
      Agreement unless otherwise specified. Any reference in this Agreement or in
      any
      other Transaction Document to any agreement, instrument, or document shall
      include all alterations, amendments, changes, extensions, modifications,
      renewals, replacements, substitutions, joinders, and supplements, thereto and
      thereof, as applicable (subject to any restrictions on such alterations,
      amendments, changes, extensions, modifications, renewals, replacements,
      substitutions, joinders, and supplements set forth herein). Any reference herein
      or in any other Transaction Document to the satisfaction or repayment in full
      of
      the Secured Obligations shall mean the repayment in full in cash of all Secured
      Obligations other than unasserted contingent indemnification Secured
      Obligations. Any reference herein to any Person shall be construed to include
      such Person’s successors and assigns. Any requirement of a writing contained
      herein or in any other Transaction Document shall be satisfied by the
      transmission of a Record and any Record so transmitted shall constitute a
      representation and warranty as to the accuracy and completeness of the
      information contained therein.

     

    [signature
      pages follow]

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement
      by
      and through their duly authorized officers, as of the day and year first above
      written.

     

    
      	
              GRANTORS:

            	
              WORKSTREAM
                INC., a corporation existing pursuant to the Canada Business Corporations
                Act

            
	 	 
	 	
              By:                                                                                                                     
                  

            
	 	
              Name:                                                                                                                    

            
	 	
              Title:                                                                                                                   
                  

            
	 	 
	 	
              6FIGUREJOBS.COM,
                INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                       

            
	 	
              Name:                                                                                                                   

            
	 	
              Title:                                                                                                                  
                  

            
	 	 
	 	
              WORKSTREAM
                USA, INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                     
                  

            
	 	
              Name:                                                                                                                   

            
	 	
              Title:                                                                                                                  
                  

            
	 	 
	 	
              PAULA
                ALLEN HOLDINGS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                     
                  

            
	 	
              Name:                                                                                                                    

            
	 	
              Title:                                                                                                                   
                  

            
	 	 
	 	
              THE
                OMNI PARTNERS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                    
                 

              Name:                                                                                                                   

            
	 	
              Title:                                                                                                                 
                   

            
	 	 
	 	
              WORKSTREAM
                MERGER SUB INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                     
                  

            
	 	
              Name:                                                                                                                   

            
	 	
              Title:                                                                                                                   
                  

            

    

    SECURITY
      AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              MAGNETAR
                CAPITAL MASTER FUND, LTD

            
	 	 
	 	
              By: Magnetar
                Financial LLC

              Its: Investment
                Manager

            
	 	 
	 	
                                                                                                                                           
                

            
	 	
              By: 

            
	 	
              Its: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              CCM
                MASTER QUALIFIED FUND, LTD.

            
	 	 
	 	
              By:                                                                                                    

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              CRESTVIEW
                CAPITAL MASTER, LLC

            
	 	 
	 	
              By: Crestview
                Capital Partners, LLC, its sole manager

            
	 	 
	 	
              By:                                                                                    
                

            
	 	
              Name: 

              Title:
                

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              FORT
                MASON MASTER, LP 

              FORT
                MASON PARTNERS, LP

            
	 	 
	
            	
              By:                                                                                                                      

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              TALKOT
                FUND

            
	 	 
	 	
              By:                                                                                              

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              SECURED
                PARTIES:

            	
              THOMAS
                B. AKIN

            
	 	 
	 	
              By:          
                  

            
	 	
              Name:  

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              SRB
                GREENWAY CAPITAL (QP), L.P.

               

              By:
                SRB Management, L.P., General Partner

               

              By:
                BC Advisors, L.L.C., General Partner

            
	 	
               

              By:                                                                                                

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              SRB
                GREENWAY CAPITAL, L.P.

               

              By:
                SRB Management, L.P., General Partner

               

              By:
                BC Advisors, L.L.C., General Partner

            
	 	
               

              By:          

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              SECURED
                PARTIES:

            	
              SRB
                GREENWAY OFFSHORE OPERATING FUND, L.P.

               

              By:
                SRB Management, L.P., General Partner

               

              By:
                BC Advisors, LLC, General Partner

            
	 	 
	 	
              By:    
                    
                   

            
	 	
              Name: 

              Title: 

            

    

     

    SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

     

    COPYRIGHT
      SECURITY AGREEMENT

     

    This
      COPYRIGHT SECURITY AGREEMENT (this “Copyright
      Security Agreement”)
      is
      made this __ day of _______, 200__, by the Grantors listed on the signature
      pages hereof (collectively, jointly and severally, “Grantors”
and
      each individually “Grantor”),
      in
      favor of the Secured Parties under and as defined in the below-described
      Security Agreement.

     

    W I T N E S S E T H:

     

    WHEREAS,
      pursuant to those certain separate Exchange Agreements, each dated as of
      ___________, 2008 (as amended, restated, supplemented, or otherwise modified
      from time to time, including all schedules thereto, collectively, the
“Exchange
      Agreements”),
      by
      and between WORKSTREAM INC., a corporation existing pursuant to the Canada
      Business Corporations Act (“Parent”),
      and
      each of the Secured Parties, Parent has agreed to exchange each Secured Party’s
      Special Warrant and 2007 Warrant for a Note and a Warrant;

     

    WHEREAS,
      in order to induce each Secured Party to so exchange its Special Warrant and
      2007 Warrant for a Note and a Warrant, as provided for in the Exchange
      Agreements, Grantors have executed and delivered to Secured Parties that certain
      Security Agreement of even date herewith (including all annexes, exhibits or
      schedules thereto, as from time to time amended, restated, supplemented or
      otherwise modified, the “Security
      Agreement”);
      and

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Secured Parties this Copyright Security Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Grantors hereby agree as
      follows:

     

    1. DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement or the Notes.

     

    2. GRANT
      OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.
      Each
      Grantor hereby grants to each Secured Party a continuing first priority security
      interest in all of such Grantor’s right, title and interest in, to and under the
      following, whether presently existing or hereafter created or acquired
      (collectively, the “Copyright
      Collateral”):
      

     

    (a) all
      of
      each Grantor’s Copyrights and Copyright Intellectual Property Licenses to which
      it is a party including those referred to on Schedule
      I
      hereto;

     

    (b) all
      reissues, continuations or extensions of the foregoing; and

     

    (c) all
      products and proceeds of the foregoing, including any claim by such Grantor
      against third parties for past, present or future infringement or dilution
      of
      any Copyright or any Copyright licensed under any Intellectual Property
      License.

     

    3. SECURITY
      FOR OBLIGATIONS.
      This
      Copyright Security Agreement and the Security Interests created hereby secures
      the payment and performance of all the Secured Obligations, whether now existing
      or arising hereafter. Without limiting the generality of the foregoing, this
      Copyright Security Agreement secures the payment of all amounts which constitute
      part of the Secured Obligations and would be owed by Grantors, or any of them,
      to Secured Parties, or any of them, whether or not they are unenforceable or
      not
      allowable due to the existence of an Insolvency Proceeding involving any
      Grantor.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4. SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Copyright Security Agreement are
      granted in conjunction with the security interests granted to Secured Parties
      pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms
      that the rights and remedies of Secured Parties with respect to their respective
      security interests in the Copyright Collateral made and granted hereby are
      more
      fully set forth in the Security Agreement, the terms and provisions of which
      are
      incorporated by reference herein as if fully set forth herein.

     

    5. AUTHORIZATION
      TO SUPPLEMENT.
      To the
      extent required under the Security Agreement, Grantors shall give Secured
      Parties prompt notice in writing of any additional copyright registrations
      or
      applications therefor after the date hereof. Grantors hereby authorize Secured
      Parties unilaterally to modify this Agreement by amending Schedule
      I
      to
      include any material future registered copyrights or applications therefor
      of
      Grantors. Notwithstanding the foregoing, no failure to so modify this Copyright
      Security Agreement or amend Schedule
      I
      shall in
      any way affect, invalidate or detract from any Secured Party’s continuing
      security interest in all Collateral, whether or not listed on Schedule
      I.

     

    6. COUNTERPARTS.
      This
      Copyright Security Agreement may be executed in any number of counterparts,
      each
      of which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Copyright Security Agreement or any other Transaction Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    7. CONSTRUCTION.
      Unless
      the context of this Copyright Security Agreement or any other Transaction
      Document clearly requires otherwise, references to the plural include the
      singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
      indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Copyright
      Security Agreement or any other Transaction Document refer to this Copyright
      Security Agreement or such other Transaction Document, as the case may be,
      as a
      whole and not to any particular provision of this Copyright Security Agreement
      or such other Transaction Document, as the case may be. Section, subsection,
      clause, schedule, and exhibit references herein are to this Copyright Security
      Agreement unless otherwise specified. Any reference in this Copyright Security
      Agreement or in any other Transaction Document to any agreement, instrument,
      or
      document shall include all alterations, amendments, changes, extensions,
      modifications, renewals, replacements, substitutions, joinders, and supplements,
      thereto and thereof, as applicable (subject to any restrictions on such
      alterations, amendments, changes, extensions, modifications, renewals,
      replacements, substitutions, joinders, and supplements set forth herein). Any
      reference herein or in any other Transaction Document to the satisfaction or
      repayment in full of the Secured Obligations shall mean the repayment in full
      in
      cash of all Secured Obligations other than unasserted contingent indemnification
      Secured Obligations. Any reference herein to any Person shall be construed
      to
      include such Person’s successors and assigns. Any requirement of a writing
      contained herein or in any other Transaction Document shall be satisfied by
      the
      transmission of a Record and any Record so transmitted shall constitute a
      representation and warranty as to the accuracy and completeness of the
      information contained therein.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement
      to be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above. 

     

    
      	
              GRANTORS:

            	
              WORKSTREAM
                INC., a corporation existing pursuant

              to
                the Canada Business Corporations Act

            
	 	 
	 	
              By:                                                                                          

            
	 	
              Name:                                                                                     
                

            
	 	
              Title:                                                                                   
                   

            
	 	 
	 	
              6FIGUREJOBS.COM,
                INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                         
                     

            
	 	
              Name:                                                                                        
                  

            
	 	
              Title:                                                                                           
                   

            
	 	 
	 	
              WORKSTREAM
                USA, INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                  

            
	 	
              Name:                                                                                                 

            
	 	
              Title:                                                                                              
                 

            
	 	 
	 	
              PAULA
                ALLEN HOLDINGS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                       

            
	 	
              Name:                                                                                                   

            
	 	
              Title:                                                                                                      

            
	 	 
	 	
              THE
                OMNI PARTNERS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                       

            
	 	
              Name:                                                                                                      

            
	 	
              Title:                                                                                                      

            
	 	 
	 	
              WORKSTREAM
                MERGER SUB INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                      

            
	 	
              Name:                                                                                                      

            
	 	
              Title:                                                                                                     

            

    

    COPYRIGHT
      SECURITY AGREEMENT

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      I

     

    to

     

    COPYRIGHT
      SECURITY AGREEMENT

     

    Copyright
      Registrations

     

    
      	
              Grantor

            	 	
              Country

            	 	
              Copyright

            	 	
              Registration
                No.

            	 	
              Registration
                Date

            
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

    

     

    Copyright
      Licenses

     

    COPYRIGHT SECURITY AGREEMENT

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    PATENT
      SECURITY AGREEMENT

     

    This
      PATENT SECURITY AGREEMENT (this “Patent
      Security Agreement”)
      is
      made this ___ day of _________, 200__, by the Grantors listed on the signature
      pages hereof (collectively, jointly and severally, “Grantors”
and
      each individually “Grantor”),
      in
      favor of the Secured Parties under and as defined in the below-described
      Security Agreement.

     

    W I T N E S S E T H:

     

    WHEREAS,
      pursuant to those certain separate Exchange Agreements, each dated as of
      ___________, 2008 (as amended, restated, supplemented, or otherwise modified
      from time to time, including all schedules thereto, collectively, the
“Exchange
      Agreements”),
      by
      and between WORKSTREAM INC., a corporation existing pursuant to the Canada
      Business Corporations Act (“Parent”),
      and
      each of the Secured Parties, Parent has agreed to exchange each Secured Party’s
      Special Warrant and 2007 Warrant for a Note and a Warrant;

     

    WHEREAS,
      in order to induce each Secured Party to so exchange its Special Warrant and
      2007 Warrant for a Note and a Warrant, as provided for in the Exchange
      Agreements, Grantors have executed and delivered to Secured Parties that certain
      Security Agreement of even date herewith (including all annexes, exhibits or
      schedules thereto, as from time to time amended, restated, supplemented or
      otherwise modified, the “Security
      Agreement”);
      and

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Secured Parties this Patent Security Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Grantors hereby agree as
      follows:

     

    1. DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement or the Notes.

     

    2. GRANT
      OF SECURITY INTEREST IN PATENT COLLATERAL.
      Each
      Grantor hereby grants to each Secured Party a continuing first priority security
      interest in all of such Grantor’s right, title and interest in, to and under the
      following, whether presently existing or hereafter created or acquired
      (collectively, the “Patent
      Collateral”):

     

    (a) all
      of
      its Patents and Patent Intellectual Property Licenses to which it is a party
      including those referred to on Schedule
      I
      hereto;

     

    (b) all
      reissues, continuations or extensions of the foregoing; and

     

    (c) all
      products and proceeds of the foregoing, including any claim by such Grantor
      against third parties for past, present or future infringement or dilution
      of
      any Patent or any Patent licensed under any Intellectual Property
      License.

     

    3. SECURITY
      FOR OBLIGATIONS.
      This
      Patent Security Agreement and the Security Interests created hereby secures
      the
      payment and performance of all the Secured Obligations, whether now existing
      or
      arising hereafter. Without limiting the generality of the foregoing, this Patent
      Security Agreement secures the payment of all amounts which constitute part
      of
      the Secured Obligations and would be owed by Grantors, or any of them, to
      Secured Parties, or any of them, whether or not they are unenforceable or not
      allowable due to the existence of an Insolvency Proceeding involving any
      Grantor.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4. SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Patent Security Agreement are
      granted in conjunction with the security interests granted to Secured Parties
      pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms
      that the rights and remedies of Secured Parties with respect to their respective
      security interests in the Patent Collateral made and granted hereby are more
      fully set forth in the Security Agreement, the terms and provisions of which
      are
      incorporated by reference herein as if fully set forth herein.

     

    5. AUTHORIZATION
      TO SUPPLEMENT.
      If any
      Grantor shall obtain rights to any new patentable inventions or become entitled
      to the benefit of any patent application or patent for any reissue, division,
      or
      continuation, of any patent, the provisions of this Patent Security Agreement
      shall automatically apply thereto. To the extent required under the Security
      Agreement, Grantors shall give prompt notice in writing to Secured Parties
      with
      respect to any such new patent rights. Without limiting each Grantor’s
      obligations under this Section
      5,
      Grantors hereby authorize Secured Parties unilaterally to modify this Agreement
      by amending Schedule
      I
      to
      include any such new patent rights of Grantors. Notwithstanding the foregoing,
      no failure to so modify this Patent Security Agreement or amend Schedule
      I
      shall in
      any way affect, invalidate or detract from any Secured Party’s continuing
      security interest in all Collateral, whether or not listed on Schedule
      I.
      

     

    6. COUNTERPARTS.
      This
      Patent Security Agreement may be executed in any number of counterparts, each
      of
      which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Patent Security Agreement or any other Transaction Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    7. CONSTRUCTION.
      Unless
      the context of this Patent Security Agreement or any other Transaction Document
      clearly requires otherwise, references to the plural include the singular,
      references to the singular include the plural, the terms “includes” and
“including” are not limiting, and the term “or” has, except where otherwise
      indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Patent
      Security Agreement or any other Transaction Document refer to this Patent
      Security Agreement or such other Transaction Document, as the case may be,
      as a
      whole and not to any particular provision of this Patent Security Agreement
      or
      such other Transaction Document, as the case may be. Section, subsection,
      clause, schedule, and exhibit references herein are to this Patent Security
      Agreement unless otherwise specified. Any reference in this Patent Security
      Agreement or in any other Transaction Document to any agreement, instrument,
      or
      document shall include all alterations, amendments, changes, extensions,
      modifications, renewals, replacements, substitutions, joinders, and supplements,
      thereto and thereof, as applicable (subject to any restrictions on such
      alterations, amendments, changes, extensions, modifications, renewals,
      replacements, substitutions, joinders, and supplements set forth herein). Any
      reference herein or in any other Transaction Document to the satisfaction or
      repayment in full of the Secured Obligations shall mean the repayment in full
      in
      cash of all Secured Obligations other than unasserted contingent indemnification
      Secured Obligations. Any reference herein to any Person shall be construed
      to
      include such Person’s successors and assigns. Any requirement of a writing
      contained herein or in any other Transaction Document shall be satisfied by
      the
      transmission of a Record and any Record so transmitted shall constitute a
      representation and warranty as to the accuracy and completeness of the
      information contained therein.

     

    [signature
      pages follow]

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to
      be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above.

     

    
      	
              GRANTORS:

            	
              WORKSTREAM
                INC., a corporation existing pursuant

              to
                the Canada Business Corporations Act

            
	 	 
	 	
              By:                                                                                                                  

            
	 	
              Name:                                                                                                            

            
	 	
              Title:                                                                                                             

            
	 	 
	 	
              6FIGUREJOBS.COM,
                INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                 

            
	 	
              Name:                                                                                                             

            
	 	
              Title:                                                                                                              

            
	 	 
	 	
              WORKSTREAM
                USA, INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                          

            
	 	
              Title:                                                                                                            

            
	 	 
	 	
              PAULA
                ALLEN HOLDINGS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                          

            
	 	
              Title:                                                                                                            

            
	 	 
	 	
              THE
                OMNI PARTNERS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                 

            
	 	
              Name:                                                                                                            

            
	 	
              Title:                                                                                                              

            
	 	 
	 	
              WORKSTREAM
                MERGER SUB INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                          

            
	 	
              Title:                                                                                                             

            

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    

    TRADEMARK
      SECURITY AGREEMENT

     

    This
      TRADEMARK SECURITY AGREEMENT (this “Trademark
      Security Agreement”)
      is
      made this ___ day of _________, 200__, by the Grantors listed on the signature
      pages hereof (collectively, jointly and severally, “Grantors”
and
      each individually “Grantor”),
      in
      favor of the Secured Parties under and as defined in the below-described
      Security Agreement.

     

    W I T N E S S E T H:

     

    WHEREAS,
      pursuant to those certain separate Exchange Agreements, each dated as of
      __________, 2008 (as amended, restated, supplemented, or otherwise modified
      from
      time to time, including all schedules thereto, collectively, the “Exchange
      Agreements”),
      by
      and between WORKSTREAM INC., a corporation existing pursuant to the Canada
      Business Corporations Act (“Parent”),
      and
      each of the Secured Parties, Parent has agreed to exchange each Secured Party’s
      Special Warrant and 2007 Warrant for a Note and a Warrant;

     

    WHEREAS,
      in order to induce each Secured Party to so exchange its Special Warrant and
      2007 Warrant for a Note and a Warrant, as provided for in the Exchange
      Agreements, Grantors have executed and delivered to Secured Parties that certain
      Security Agreement of even date herewith (including all annexes, exhibits or
      schedules thereto, as from time to time amended, restated, supplemented or
      otherwise modified, the “Security
      Agreement”);
      and

     

    WHEREAS,
      pursuant to the Security Agreement, Grantors are required to execute and deliver
      to Secured Parties this Trademark Security Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises and mutual covenants herein
      contained and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Grantors hereby agree as
      follows:

     

    1. DEFINED
      TERMS.
      All
      capitalized terms used but not otherwise defined herein have the meanings given
      to them in the Security Agreement or the Notes.

     

    2. GRANT
      OF SECURITY INTEREST IN TRADEMARK COLLATERAL.
      Each
      Grantor hereby grants to each Secured Party a continuing first priority security
      interest in all of such Grantor’s right, title and interest in, to and under the
      following, whether presently existing or hereafter created or acquired
      (collectively, the “Trademark
      Collateral”):

     

    (a) all
      of
      its Trademarks and Trademark Intellectual Property Licenses to which it is
      a
      party including those referred to on Schedule
      I
      hereto;

     

    (b) all
      goodwill, trade secrets, proprietary or confidential information, technical
      information, procedures, formulae, quality control standards, designs, operating
      and training manuals, customer lists, and other General Intangibles with respect
      to the foregoing;

     

    (c) all
      reissues, continuations or extensions of the foregoing; 

     

    (d) all
      goodwill of the business connected with the use of, and symbolized by, each
      Trademark and each Trademark Intellectual Property License; and

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e) all
      products and proceeds of the foregoing, including any claim by such Grantor
      against third parties for past, present or future (i) infringement or dilution
      of any Trademark or any Trademark licensed under any Intellectual Property
      License or (ii) injury to the goodwill associated with any Trademark or any
      Trademark licensed under any Intellectual Property License.

     

    3. SECURITY
      FOR OBLIGATIONS.
      This
      Trademark Security Agreement and the Security Interests created hereby secures
      the payment and performance of all the Secured Obligations, whether now existing
      or arising hereafter. Without limiting the generality of the foregoing, this
      Trademark Security Agreement secures the payment of all amounts which constitute
      part of the Secured Obligations and would be owed by Grantors, or any of them,
      to Secured Parties, or any of them, whether or not they are unenforceable or
      not
      allowable due to the existence of an Insolvency Proceeding involving any
      Grantor.

     

    4. SECURITY
      AGREEMENT.
      The
      security interests granted pursuant to this Trademark Security Agreement are
      granted in conjunction with the security interests granted to Secured Parties
      pursuant to the Security Agreement. Each Grantor hereby acknowledges and affirms
      that the rights and remedies of Secured Parties with respect to their respective
      security interests in the Trademark Collateral made and granted hereby are
      more
      fully set forth in the Security Agreement, the terms and provisions of which
      are
      incorporated by reference herein as if fully set forth herein.

     

    5. AUTHORIZATION
      TO SUPPLEMENT.
      If any
      Grantor shall obtain rights to any new trademarks, the provisions of this
      Trademark Security Agreement shall automatically apply thereto. To the extent
      required under the Security Agreement, Grantors shall give prompt notice in
      writing to Secured Parties with respect to any such new trademarks or renewal
      or
      extension of any trademark registration. Without limiting each Grantor’s
      obligations under this Section
      5,
      Grantors hereby authorize Secured Parties unilaterally to modify this Agreement
      by amending Schedule
      I
      to
      include any such new trademark rights of Grantors. Notwithstanding the
      foregoing, no failure to so modify this Trademark Security Agreement or amend
      Schedule
      I
      shall in
      any way affect, invalidate or detract from any Secured Party’s continuing
      security interest in all Collateral, whether or not listed on Schedule
      I.
      

     

    6. COUNTERPARTS.
      This
      Trademark Security Agreement may be executed in any number of counterparts,
      each
      of which shall be deemed to be an original, but all such separate counterparts
      shall together constitute but one and the same instrument. In proving this
      Trademark Security Agreement or any other Transaction Document in any judicial
      proceedings, it shall not be necessary to produce or account for more than
      one
      such counterpart signed by the party against whom such enforcement is sought.
      Any signatures delivered by a party by facsimile transmission or by e-mail
      transmission shall be deemed an original signature hereto.

     

    7. CONSTRUCTION.
      Unless
      the context of this Trademark Security Agreement or any other Transaction
      Document clearly requires otherwise, references to the plural include the
      singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
      indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Trademark
      Security Agreement or any other Transaction Document refer to this Trademark
      Security Agreement or such other Transaction Document, as the case may be,
      as a
      whole and not to any particular provision of this Trademark Security Agreement
      or such other Transaction Document, as the case may be. Section, subsection,
      clause, schedule, and exhibit references herein are to this Agreement unless
      otherwise specified. Any reference in this Trademark Security Agreement or
      in
      any other Transaction Document to any agreement, instrument, or document shall
      include all alterations, amendments, changes, extensions, modifications,
      renewals, replacements, substitutions, joinders, and supplements, thereto and
      thereof, as applicable (subject to any restrictions on such alterations,
      amendments, changes, extensions, modifications, renewals, replacements,
      substitutions, joinders, and supplements set forth herein). Any reference herein
      or in any other Transaction Document to the satisfaction or repayment in full
      of
      the Secured Obligations shall mean the repayment in full in cash of all Secured
      Obligations other than unasserted contingent indemnification Secured
      Obligations. Any reference herein to any Person shall be construed to include
      such Person’s successors and assigns. Any requirement of a writing contained
      herein or in any other Transaction Document shall be satisfied by the
      transmission of a Record and any Record so transmitted shall constitute a
      representation and warranty as to the accuracy and completeness of the
      information contained therein.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    [signature
      pages follow]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement
      to be
      executed and delivered by its duly authorized officer as of the date first
      set
      forth above. 

     

    
      	
              GRANTORS:

            	
              WORKSTREAM
                INC., a corporation existing pursuant 

              to
                the Canada Business Corporations Act

            
	 	 
	 	
              By:                                                                                                                  

            
	 	
              Name:                                                                                                              

            
	 	
              Title:                                                                                                                 

            
	 	 
	 	
              6FIGUREJOBS.COM,
                INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                 

            
	 	
              Name:                                                                                                              

            
	 	
              Title:                                                                                                                 

            
	 	
            
	 	
              WORKSTREAM
                USA, INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                 

            
	 	
              Name:                                                                                                             

            
	 	
              Title:                                                                                                                

            
	 	 
	 	
              PAULA
                ALLEN HOLDINGS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                           

            
	 	
              Title:                                                                                                             

            
	 	 
	 	
              THE
                OMNI PARTNERS, INC., a Florida corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                            

            
	 	
              Title:                                                                                                                

            
	 	 
	 	
              WORKSTREAM
                MERGER SUB INC., a Delaware corporation

            
	 	 
	 	
              By:                                                                                                                

            
	 	
              Name:                                                                                                            

            
	 	
              Title:                                                                                                                

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      I

    to

    TRADEMARK
      SECURITY AGREEMENT

     

    Trademark
      Registrations/Applications

     

    
      	
              Grantor

            	 	
              Country

            	 	
              Mark

            	 	
              Application/
                Registration No.

            	 	
              App/Reg
                Date

            
	
               

            	 	
               

            	 	
               

            	 	
               

            	 	
               

            
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

    

     

    Trade
      Names

     

    Common
      Law Trademarks 

     

    Trademarks
      Not Currently In Use

     

    Trademark
      Licenses

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