Workstream Inc. 485 N. Keller Road, Suite 500 Maitland, FL32751 www.workstreaminc.com

 

1.

 

2.

 

a.

 

b.

 

c.

 

1.

With the exception of ordinary changes due to the normal operations of the business, the assets and liabilities of the Company, at the time of closing, shall be in all material respects the same as that shown on the December 31, 2010 (the “Balance Sheet Date”) unaudited balance sheet of the Company (a copy of which is attached to this letter agreement as Exhibit B) (the “Balance Sheet”); as of the closing date, no event or circumstance shall have occurred which would substantially and negatively affect the value of the Company or the membership interests or which would impair the value of Workstream’s rights under either Employment Agreement (as defined below) or either Non-Competition Agreement (as defined below);

 

2.

Workstream shall have received a copy of the Articles of Organization and Operating Agreement of the Company, certified by each of you to be true, complete and accurate as of the closing date;

 

3.

Such approvals or consents as may be necessary from all governmental entities and third parties to consummate the transactions contemplated under this letter agreement shall have been obtained;

 

4.

All proceedings to be taken in connection with the transactions contemplated by this letter agreement and all documents incident hereto shall be satisfactory in form and substance to Workstream, and Workstream shall have received copies of all such documents and other evidences as it may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith;

 

5.

Each of you shall have executed and delivered to the Company an employment agreement, substantially in the form set forth hereto as Exhibit C (each such agreement, an “Employment Agreement” and, collectively, the “Employment Agreements”);

 

6.

Each of you shall have executed and delivered to Workstream the questionnaire set forth in the memo included in Exhibit D to this letter agreement (the “Investor Questionnaire”) and Workstream shall be satisfied in its sole discretion with the information set forth therein;

 

7.

The Members of the Company shall have approved the Merger, this letter agreement and the other transactions contemplated hereby;

 

8.

Each of you shall have executed and delivered to Workstream a non-competition agreement, substantially in the form attached as Exhibit E to this letter agreement (each such agreement, a “Non-Competition Agreement” and, collectively, the “Non-Competition Agreements”);

 

9.

The representations and warranties each of you and the Company have made in this letter agreement shall be true and accurate in all material respects as of the closing date; and

 

10.

All agreements to be performed or complied with by each of you and the Company on or prior to the closing date arising out of this Agreement shall have been performed or complied with in all material respects.

 

11.

Each of you shall have delivered the Company Certificates to the Company.

 

12.

No action, suit, proceeding or investigation by or before any governmental authority shall have been instituted or threatened, the effect of which could restrain, prohibit or invalidate the transactions contemplated by this letter agreement.

 

1.

The Company shall have executed and delivered to each of you your respective Employment Agreements;

 

2.

No stop order suspending the effectiveness of Workstream’s Common Shares shall have been issued by the SEC and no proceeding for that purpose shall have been initiated or threatened by the SEC;

 

3.

The representations and warranties made by Workstream in this letter agreement shall be true and accurate in all material respects as of the closing date; and

 

4.

All agreements to be performed or complied with by Workstream on or prior to the closing date arising out of this Agreement shall have been performed or complied with in all material respects.

 

1.

The Company is duly organized, validly existing and in good standing in the State of Arizona and is in good standing in each jurisdiction in which it conducts business; the Company has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted;

 

2.

This letter agreement has been duly executed and delivered by each of you and constitutes the valid and binding agreement of each of you enforceable against each of you in accordance with its terms; as of the closing, each Non-Competition Agreement will be duly executed and delivered by Becker and Liu, respectively, and will constitute the valid and binding agreement of each Becker and Liu, respectively, enforceable against each of the foregoing, respectively, in accordance with its terms; the Members of the Company have approved this letter agreement, the Merger and the other transactions contemplated hereby; the board of managers of the Company has approved this letter agreement, the Merger and the other transactions contemplated hereby, and any and all other actions required to be taken by the Company, its Members and its board of managers to consummate the transactions contemplated hereby have been taken;

 

3.

The Company has the requisite limited liability company power and authority to execute and deliver this letter agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereunder; the execution, delivery and performance of this letter agreement by the Company has been duly authorized and approved by all necessary limited liability company action; this Agreement has been duly executed and delivered by the Company and constitutes the valid and binding agreement of the Company enforceable against the Company in accordance with its terms; the Company Certificates to be delivered to Workstream in connection with the Merger shall be free and clear of all liens, mortgages, encumbrances, security interests, voting agreements, exceptions or claims of any nature whatsoever; immediately prior to the Merger you will have good and marketable title to all of the LLC Membership Units, f ree and clear of all liens, mortgages, encumbrances, security interests, voting agreements, exceptions or claims of any nature whatsoever; the equity interests in the Company consist solely of the LLC Membership Units in the Company (the “LLC Membership Units”) owned by Becker and Liu, all of which have been duly authorized, validly issued, fully paid and nonassessable.

 

4.

Attached as Exhibit B is the Balance Sheet and attached as Exhibit B-1 is (i) the related unaudited income statement for the twelve (12) month period ended December 31, 2010, (ii) the unaudited balance sheets for the fiscal years ended December 31, 2008 and December 31, 2009 and (iii) the related unaudited income statements for the fiscal years then ended (such balance sheets and income statements, together with Balance Sheet, collectively, the “Financial Statements”); each of the Financial Statements has been prepared from and is consistent with the books and records of the Company and fairly presents, in all material respects, the financial condition and income of the Company at such dates and for the period(s) covered thereby; since the Balance Sheet Date there have been no material chan ge in the assets or liabilities, or in the business or condition, financial or otherwise, or in the result of operations, of the Company; since the Balance Sheet Date the Company has not experienced a material adverse effect on its business, operations or financial condition;

 

5.

There are no liabilities or obligations of the Company of any nature, whether fixed, contingent, accrued or otherwise, liquidated or unliquidated, and whether due or to become due, except (a) liabilities reflected or reserved against and disclosed in the Financial Statements and (b) liabilities which have arisen since December 31, 2010 in the ordinary course of business consistent in all material respects with past custom and practice of the Company; the Company has not guaranteed or is not otherwise primarily or secondarily liable in respect of any obligation or liability of any other person or entity, except to the extent disclosed in the Financial Statements;

 

6.

The Company has good and marketable title to all of its owned assets (real and personal, tangible and intangible), including, without limitation, those assets set forth in the Balance Sheet and those assets acquired by the Company after the Balance Sheet Date, in each case subject to no lien, encumbrance, charge or other restriction of any kind or character; the Company owns no real property; each lease to which the Company is a party is in full force and effect and all rents due thereunder have been paid;

 

7.

Except as set forth on Schedule 2, the Company is not bound by or a party to (a) any employment contract or consulting agreement, (b) any agreement or instrument containing restrictions on the payment of dividends or any other distribution with respect to its LLC Membership Units, (c) any loan or advance to, or investment in, any person or entity, or any commitment relating to the foregoing, (d) any agreement or commitment relating to a maximum possible liability or obligation on the part of the Company in excess of $5,000, (e) any guarantee or other contingent liability related to the indebtedness or obligation of any person or entity, (f) any management service or consulting agreement or arrangement, (g) any agreement or commitment limiting the ability of the Company to engage in any line of business or to compete with any pers on or entity, (h) any agreement or contract involving indebtedness of the Company or (i) any agreement or commitment not entered into in the ordinary course of business (each, a “Material Contract”);

 

 

exists no (i) default or event of default by the Company or any other party to any such instrument, contract or other agreement or (ii) event, occurrence, condition or act (including the consum­mation of the transactions contemplated hereby) which, with the giving of notice, the lapse of time or the happening of any other event or condition, would become a default or event of default by the Company or any other party thereto; to your actual knowledge, the execution, delivery and performance of this letter agreement and the consummation of the transactions contemplated hereby will not (a) result in or give to any person or entity any right of termination, non-renewal, cancellation, withdrawal, acceleration or modification in or with respect to any Material Contract, (b) result in or give to any person or entity any additional rights or entitlement to increased, additional, accelerated or guaranteed payments under any Material Contract, (c) result in the creation or imposition of any encumbrance or lien upon any of the assets of the Company under the terms of any Material Contract, (d) result in or give rise to any action, claim or demand against the Company or (e) result in any restriction on the Company’s rights under any Material Contract;

 

9.

Except as set forth on Schedule 4, between the Balance Sheet Date and the closing date, the Company has not (a) sold, transferred or otherwise disposed of any of its assets, other than in the ordinary course of business, (b) permitted any of its assets to be subjected to any mortgage, pledge, lien, security interest, encumbrance, restriction or charge of any kind, (c) made any capital expenditure or commitment therefor, (d) made or declared any distribution, dividend or similar payment to its Members, (e) increased indebtedness for borrowed money, (f) written-off as uncollectible any notes or accounts receivable without disclosure to purchaser, (g) increased the wages or salary of any employee or paid any bonuses or made any special payment to any employee, (h) cancelled or waived any claims or rights, (i) entered into any materi al transaction, (j) conducted its business other than in the ordinary course or (k) agreed, whether or not in writing, to do any of the foregoing;

 

10.

Except as set forth on Schedule 5, there exists no inquiry, investigation, judicial or administrative claim, arbitration hearing or lawsuit, pending or threatened, against the Company or either of you or otherwise relating to either of you, the Company, or any LLC Membership Units;

 

11.

The execution of this letter agreement, and the documents contemplated hereby, by each of you and the performance by each of you of your respective obligations hereunder and/or thereunder (a) do not require any filing with, or permit, consent or approval of, or the giving of any notice to, any governmental or regulatory body, agency or authority to which the Company or either of you is subject, other than the filing of the Certificate of Merger with the Arizona Corporation Commission of the State of Arizona, (b) do not violate any statute, ordinance, rule, regulation, order or decree of any court or any governmental or regulatory body, agency or authority applicable to the Company or either of you, (c) will not result in a breach of any contract, mortgage, indenture, agreement or understanding to which the Company or either of you is a party and (d) do not violate the Company’s Articles of Organization or Operating Agreement;

 

12.

The Company has all licenses and permits necessary to operate its business and is otherwise in compliance with, and to its actual knowledge, not in violation of, any applicable federal, state or local statutes, laws or regulations;

 

13.

All property, sales, use, federal, state and local taxes, assessments and governmental charges of the Company that are required to be paid on or prior to the closing date have been paid and are not past due; you are not aware of any pending or threatened assessment with respect to such taxes; estimated accrued taxes have been fairly computed and are fairly reflected in the Financial Statements; each of you will have caused the Company to file the appropriate tax returns and reports with respect to the Company for any tax period ending on or prior to the closing date; the Company is and since October 1, 2010 has been classified as a corporation for federal and state income tax purposes; all tax returns required to be filed with any governmental authority by or on behalf of the Company have been timely filed in compliance with all applicable laws, and all such tax returns were true, correct and complete in all mat erial respects; the Company is not currently a beneficiary of any extension of time within which to file any tax return; all taxes owed by the Company (whether or not shown as due and payable on any tax return) have been timely paid to the appropriate taxing authority; no tax return of the Company with respect to any pre-closing tax period has ever been audited or is the subject of an audit by any taxing authority; there are no liens for taxes upon the assets or properties of the Company; neither the Company nor either of you has received notice of any claim by a governmental entity in a jurisdiction where the Company does not file tax returns that the Company is or may be subject to taxation by that governmental entity; the Company has withheld and remitted to the appropriate taxing authority all taxes required to have been withheld and remitted in connection with amounts paid or owing to any employee, independent contractor, creditor or other person;

 

14.

No transfer, sales, stamp or other taxes will be imposed or levied on the Company by any governmental or taxing authority in connection with the Merger and the transactions contemplated hereby;

 

15.

No officer, director, affiliate or employee of the Company either is or possesses, directly or indirectly, any financial interest in, or is a director, officer or employee of, any entity which is a client of, supplier to, customer of, lessor to, lessee of or competitor or potential competitor of the Company;

 

16.

The operation and maintenance of the business of the Company requires no rights under patents, registered or unregistered trademarks, registered or unregistered, issued or pending, service marks, copyrights, trade secrets or proprietary information other than rights under patents, trademarks, service marks, copyrights, trade secrets, know-how, proprietary information, or other intellectual property owned by the Company and rights thereto granted for the benefit of the Company pursuant to license agreements (collectively, the “Intellectual Property”) that are in full force and effect; the rights of the Company in and to each item of Intellectual Property owned or licensed by the Company are free and clear of any liens, claims or encumbrances whatsoever; all of the Company’s rights in and to such Intellectual Property owned by the Company are freely

 

17.

The Company does not maintain, sponsor, contribute to or have any liability under any agreement, plan, practice or program, whether written or oral, providing for bonus payments, child or dependent care benefits, death benefits, accidental death and dismemberment benefits, deferred compensation benefits, disability or other wage continuation benefits, educational assistance or tuition benefits, health benefits, paid holiday benefits, incentive compensation payments, leave of absence rights, medical expense payment or reimbursement benefits, retiree medical benefits, retiree life insurance benefits, profit sharing, pension or other retirement benefits, stock option, stock appreciation rights or stock purchase benefits or severance or termination benefits (including post-employment consulting arrangements), including without limitation any “employee benefit plan” (as such term is defined in Section 3(3 ) of the Employee Retirement Income Security Act of 1974, as amended), nor is the Company treated as a “single employer (within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as amended) with respect to any such employee benefit plans; no present or former employee of the Company shall be entitled to any termination or severance payments, retirement pay or retirement benefits of any kind;

 

18.

Each of you represents that as of the date hereof you are an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act of 1933 and you are acquiring the Acquired Shares for investment and for your own account and not with a view to, or for resale in connection with, any distribution; the information provided by each of you on your respective Investor Questionnaire is true, complete and accurate in all respects;

 

20.

No person is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee, directly or indirectly, in connection with the transactions contemplated by this letter agreement.

 

A.

Workstream is duly organized, validly existing and in good standing under the laws of Canada and is in good standing in each jurisdiction in which it conducts business; Workstream has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted; and

 

B.

This letter agreement has been duly executed and delivered by Workstream and constitutes Workstream’s valid and binding agreement enforceable against Workstream in accordance with its terms.

 

C.

The Acquired Shares to be issued as part of the Merger Consideration will be, when issued in accordance with the terms hereof, duly authorized and validly issued and not subject to preemptive rights.

 

D.

Workstream has all licenses and permits necessary to operate its business and is otherwise in compliance with, and to its actual knowledge, not in violation of, any applicable federal, state or local statutes, laws or regulations.

 

E.

As of their respective filing dates, the Workstream Filings complied in all material respects with the requirements of the Securities Act of 1933 and the Exchange Act of 1934 applicable to such Workstream Filings.

Bill Becker (50%)

$867,500

$77,000

$117,500

Shaung Liu (50%)

$867,500

$77,000

$117,500

(i) Subscriber certifies that Subscriber has a net worth (jointly with Subscriber’s spouse, if any) in excess of $1,000,000, excluding the value of Subscriber’s primary residence.

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(ii)        Subscriber certifies that Subscriber had individual income for each of the years 2009 and 2010 in excess of $200,000 and has a reasonable expectation of reaching the same income level in 2011.

_______

(iii)        Subscriber certifies that he or she and his or her spouse had a joint income for each of the years 2009 and 2010 in excess of $300,000 and has a reasonable expectation of reaching the same income level in 2011.

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(iv)        If Subscriber is an entity, it certifies that all of the equity owners satisfy the standards set forth in (i), (ii) or (iii) above or that it has assets in excess of $5,000,000 and was not formed for the specific purpose of acquiring the Shares.

_______

(v)        If Subscriber is a trust, it certifies that it has total assets in excess of $5,000,000, that its investment in the Shares is being directed by a person having such knowledge and experience in financial and business matters as to evaluate the merits and risks of such an investment, and that it was not formed for the specific purpose of acquiring the Shares.

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(vi)        If Subscriber is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, it certifies that it has total assets in excess of $5,000,000 or that the decision to invest in the Shares is being made by a plan fiduciary which is a bank, savings and loan association, insurance company or registered investment adviser.

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(vii)        None of the standards set forth in (i), (ii), (iii) or (iv) above apply.

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Printed: ____________________________

By: _________________________

Name:

Dated: _____________________________

Title: