UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

SCHOTTENFELD QUALIFIEDASSOCIATES LP, on behalf of itself and allothers similarly situated,

Plaintiffs,CASE No. 05-CV-7092

v.

WORKSTREAM, INC., MICHAELMULLARKEY, and DAVID POLANSKY,

Defendants.

..LASS DISTRIBUTION ORDER.'

WHEREAS, this Class Action was settled for a payment of cash and stock totaling S3.9

million;

WHEREAS, on August 12. 2008, the final settlement and dismissal of this class action

was approved;

WHEREAS, the Garden City Group ("GCG"), the Court-appointed Claims

Administrator, has mailed out, received, reviewed and verified the Proofs of Claim filed in

connection with the settlement of this class action, as detailed in the Affidavit of Stephen J.

Cirami in Support of the Motion for Distribution of the Net Settlement Fund (the "Cirami

Affidavit") and the exhibits attached thereto;

WI fEREAS, GCG has accepted and rejected certain claims submitted by Class Members,

as detailed in the Cirami Affidavit;

Al! capitalized terms (together with their cognate forms) used herein, and notothenvise defined herein, shall have the same meanings as set forth in the Settlement Agreement,dated March 7, 2008.

WHEREAS, pursuant to the Court-appro•ed Plan of Allocation and with the cooperation

of the parties. GCG has finalized a list of the Class Members entitled to a portion of the Net

Settlement Fund, calculated the respective percentages of each valid claimant's pro rata share,

and applied that calculation to assess the approximate amounts of cash and stock to be

distributed to each claimant, as detailed in the Cirami Affidavit;

WHEREAS, GCG and others have incurred and expect to incur costs associated with the

administration of this Settlement, as detailed in the Cirami Affidavit, and that such

Administrative Costs are reasonable and necessary;

WHEREAS, the Stock Consideration portion of the Gross Settlement Fund has, since its

deposit into the Class Escrow Account, increased in value and thereby created a taxable liability,

thus necessitating the distribution of the Stock Consideration prior to the distribution of the Cash

Consideration so that an accurate tax liability can be calculated and paid from the cash portion of

the Gross Settlement Fund;

WHEREAS, Lead Plaintiffs' Counsel believes that a cash reserve of $20,000 should be

created in order to address any prospective Administrative Costs, including inter alia, taxes, tax

compliance and the cost of distributing the cash and stock;

WHEREAS. Plaintiffs submit for the Court's review and approval this proposed order

authorizing the final distribution of the Gross Settlement Fund pursuant to paragraph 18 of the

Settlement Agreement: and,

WHEREAS, Defendants do not oppose the entry of this Order;

IT IS HEREBY ORDERED THAT, for good cause having been shown and there being

no lawful opposition thereto, the Court:

1. Approves the Claims Administrator's administrative determinations concerning

the acceptance and rejection of the claims submitted by Class Members;

2. Approves the payment of any Administrative Costs, including such costs incurred

prior to and following the filing of this Order, subject to the creation of a reserve fund of S20,000

to pay such prospective Administrative Costs;

3. Approves the distribution of the Gross Settlement Fund as follows:

a. The Stock Consideration portion of the Gross Settlement Fund shall be

distributed in accordance with the pro rata determinations reflected in the C'irami Affidavit.

b. Subject to the payment of any taxes and Administrative Costs, in addition

to thc creation of a reserve fund of S20,000, the Cash Consideration portion of the Net

Settlement Fund shall be distributed in accordance with the pro rata determination reflected in

the Cirami Affidavit.

4. Authorizes Lead Plaintiffs' Counsel to distribute such residual funds, if any, that

remain following the distribution of the Net Settlement Fund, to The Federal Judicial Center

Foundation, 28 U.S.C. § 629.

SO ORDERED:

Dated: Whi5

g-/ ?"-M7 t Plains, New York

tiAAAi CATHY EIBEL, U.S.D.J.

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

SCHOTTENFELD QUALIFIEDASSOCIATES LP, on behalf of itself and allothers similarly situated,

Plaintiffs,CASE No. 05-CV-7092 (CLB)

v.

WORKSTREAM, INC., MICHAELMULLARKF.Y, and DAVID POLANSKY,

Defendants.

AFFIDAVIT OF STEPHEN J. CRAM! IN SUPPORT OF THEMOTION FOR DISTRIBUTION OF THE NET SETTLEMENT FUND,

STATE OF NEW YORK )) ss.:

COUNTY OF SUFFOLK )

STEPHEN J. CIRAMI being duly sworn, deposes and says:

I. I am the Vice President of Operations for The Garden City Group, Inc. ("GCG"),

the Claims Administrator in connection with the settlement of the above-captioned litigation (the

"Litigation"). I have personal knowledge of the facts stated herein.

DISSEMINATION OF NOTICE AND PROOF OF CLAIM AND RELEASE

2. A settlement of the Litigation involving Workstream, Inc. ("Workstream") with a

vahie of $3,900,000, consisting of $3,300,000 in cash, plus interest, and $600,000 in Workstream

stock, was proposed pursuant to the Stipulation of Settlement dated March 7, 2006 (the

"Stipulation"). By its Preliminary Approval Order dated March 11, 2006, this Court

preliminarily approved the proposed settlement as set forth in the Stipulation, approved the

appointment of GCG as Claims Administrator, and directed GCG to provide notice of the

proposed settlement to potential members of the Class. As more fully described in the Affidavit

of Jose C. Fraga dated June 10, 2008, and previously filed with the Court, GCG distributed the

Court-approved Notice of Proposed Settlement of Class Action, Settlement Fairness Hearing and

Motion for Attorneys' Fees and Reimbursement of Expenses (the "Notice") and Proof of Claim

and Release form (the "Proof of Claim" and, together with the Notice, the "Claim Packet") to

potential members of the Class commencing on March 25, 2008. Further, pursuant to the

Preliminary Approval Order, GCG Communications, the media division of GCG, published the

Summary Notice of Proposed Settlement and Settlement Hearing in The Wail Street Journal on

March 25, 2008. By its Order and Final Judginent dated August 12, 2008, this Court approved

the Settlement as fair, reasonable and adequate.

PROCEDURES FOLLOWED IN PROCESSING CLAIMS

3. Under the terms of the Stipulation, Class Members were required to submit a

completed Proof of Claim in order to obtain their share of the Net Settlement Fund (the

$3,900,000, less all attorneys' fees and expenses of the Litigation approved by this Court,

including reimbursement awards to Plaintiffs, administration fees and expenses, plus interest

earned on the Settlement Fund, less taxes payable on such interest).

4. GCG undertook the following tasks in order to prepare to process the Proofs of

Clahn: conferred with Plaintiffs' Co-Lead Counsel to define the project and guidelines for claims

processing; trained staff in the specifics of the project; and developed programs for entry of the

claimants personal and transactional information. More specifically, in support of the work

described above, OCG's computer staff designed, implemented and tested the following

programs for this administration: (a) data entry screens which store claim information including

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all transactional data included on each Proof of Claim, as well as message codes and, where

necessary, text to denote conditions existing within the claim; (b) programs to load and analyze

transactional data submitted electronically for all electronically filed claims (the load program

converts the data submitted into the format required by the calculation program: the analysis

program determines if the data is consistent and complete and triggers a response to the

electronic filer where appropriate); (c) a calculation program to analyze the transactional data for

all claims, and calculate the Recognized Claim based on the Plan of Allocation of Net Settlement

Fund Among Class Members contained in the Notice; (d) programs to generate various reports

throughout and at the conclusion of the administration, including lists of all eligible and

ineligible claims; and (e) check writing programs which calculate each eligible claimant's award

amount by determining the proration factor for the Class and applying it against the Recognized

Claim as calculated above.

5. Class Members seeking to share in the Net Settlement Fund were directed in the

Notice to submit their Proofs of Claim to:

Workstream, Inc. Securities Litigationc/o The Garden City Group, Inc.

P.O. Box 9151Dublin, OH 43017-4151

6. GC(.1 sorted incoming mail into (I) Proofs of Claim, (2) responses to deficiency

letters, and (3) administrative mail. Administrative mail includes all mail other than Proofs of

Claim and supportimr, documentation and responses to deficiency letters, such as requests for

claim forms, requests for change of address. questions regarding the administration process, and

inquiries about the status of the administration. Claim Packets that were returned by the Post

Office as undeliverable were reviewed for better addresses and, where available, new addresses

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were entered into the database and new Claim Packets were mailed to the updated addresses.

Administrative mail was reviewed and appropriate responses were provided to the sender.

7. The Proofs of Claim were opened and scanned into a database along with all

submitted documentation, and were then assigned individual claim numbers. 'File information

from each claim form, including the name, address, last four digits of the Taxpayer I.D. or Social

Security Number of the claimant, and the purchase and sale transactions along with the holdings

listed on the claim were then entered into a computerized database. The documentation provided

in support of each claim was reviewed to ascertain whether the claimant had in fact purchased or

acquired Workstream common stock during the time period of January 14, 2005 through April

14, 2005. inclusive (the "Class Period -). Claims were then reviewed to be sure they were not

from Defendants, members of the immediate family of each of the Defendants, any subsidiary or

affiliate of Workstream Inc. and the directors officers of Workstream Inc. or its subsidiaries or

affiliates, or any entity in which any excluded person has a controlling interest, and the legal

representatives, heirs, successors arid assigns claiming through any excluded person; to the

extent that the identities of such persons and entities were known to us through the list of

Defendants and through the claimant's certification on the Proof of Claim.

THE DEFICIENCY NOTICE AND CURE PROCESS

8. GC0 established internal claim codes to identify and classify types of claims and

conditions that existed within the claims. These claim conditions included, among other things,

notation about which claims were partially deficient and which claims were wholl y deficient.

Accordine.ly, if a claim was determined to be wholly deficient (for example, if the claim was

missing documentation for the entire claim, the claimant did not sign the claim or did not provide

enough information to calculate the claim or if the claim was determined to have no Recognized

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Claim when calculated under the Court-approved Plan of Allocation), we mailed a letter entitled

"Notice of Rejection of Your Entire Claim." This letter described to the claimant the defect(s)

with his, her or its claim and what, if anything, was necessary to complete the claim. The letter

required a submission of the appropriate information and/or documentary evidence to complete

the claim within 20 days, or the claim would be rejected in its entirety.

9. lf a claim was determined to be partially deficient (for example, if the claimant

was missing documentation for part of the claim, or did not supply all transactional information).

we mailed a letter entitled "Notice of Rejection of Part of Your Claim." This letter described to

the claimant the clefcct(s) in his, her or its claim and what was necessary to complete the claim,

or the claim would only be eligible to the extent it was complete and documented. This letter

also provided a 20 day response period to complete the claim.

10. Responses to these Notices of Rejection were carefully reviewed and evaluated.

If the response cured the deficiency, the database was updated to reflect the change(s) in the

claim.

II. Attached hereto as Exhibit "A" are copies of the forms of letters used to notify

claimants of the rejection of their claims in part or in their entirety. Both letters advised the

claimant of his, her or its right to request this Court's review of our administrative determination

rejecting the claim. The letters stated that the claimant could request this Court's review of the

rejection of the claim by filing a statement in writing setting forth the reasons why he, she, or it

believes that the claim was adequately submitted.

12. To date, GC.G has received letters from two claimants contesting the

administrative rejection and requesting this Court's review of his, her or its claim. One of these

claimants simultaneously provided adequate documentation and/or information to GCG to

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complete his/her/its Proof of Claim and had cured the deficiency, thus mooting his/her/its request

for Court review. Nevertheless ; GCG contacted both of these contesting claimants by telephone

to advise them of the status of their claim and explain the administrative determination. As a

result of these communications, one claimant mentioned above withdrew his/her/its objection

because the claim is now in good standing.

13. 'fhe current status of the other claim as well as the history of the communication

between GCCi and the claimant requesting judicial review of his Proof of Claim, is as follows:

The claimant (Claim No. 1000269) submitted a Proof of Claim listing a total of 107.459 shares

of Workstream common stock held at the beginning of the Class Period (close of trading on

January 13, 2005), he showed 90.000 shares sold during the Class Period, and 17,459 shares held

at the end of the Class Period (close of trading on July 13, 2005). Because there were no

purchases of Workstream common stock during the Class Period. the claim did not fit the

definition of the Class and GCG mailed a Letter of Rejection of Your Entire Claim to the

claimant on October 15, 2008. The claimant responded to this Letter of Rejection with a signed

letter dated October 25. 2008 requesting, the Court's review of the claim. GCG staff left a

message with the clannant on October 31, 2008, who later returned the call on November 3,

2008. GCG staff explained that. according to the Class definition, a class member must have

purchased or otherwise acquired Workstream common stock during the Class Period. The

claimant wished to maintain his request for this C'ourt's review of the claim. A copy of the

claim, the supporting documentation, and all correspondence are attached hereto as Exhibit W.

GCCi staff conferred with Plaintiffs' Co-Lead Counsel who thereafter advised the Court and the

contesting claimant of the basis for the rejection. which the Court approved by Order dated

January 12, 2009.

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14. After all responses to the letters referenced above were received and evaluated

and claims updated, GCG staff called all claimants with a still deficient claim and potential

recognized claim to provide the claimant a final opportunity to fix his, her or its claim. In

addition, GCG staff made multiple attempts to reach claimants with a recognized claim of

$10,000 or more until their deficiency was cleared. If in response to the telephone call the

claimant cured the deficiency, the database was updated to reflect the change. These calls were

completed on October 31. 2008.

15. Recognized Claim amounts were calculated for claims which were properly filed

and supported with adequate documentary , evidence pursuant to the Court-approved Plan of

Allocation set forth on pa2c 11, Section K of the Notice which is attached as Exhibit "C".

CLAIMS DETERMINATION

16. GCG has received Proof of Claim forins for 278 claimants.

17. Submitted herewith as Exhibit "D" is a computer printout listing all claims filed

herein. The first portion of the printout lists all the timely filed Qualified Claimants in claim

number order and shows their Recomized Claim amounts, estimated Cash awards, and estimated

Stock awards l _ followed by a list of accepted Claimants submitted after the September 22, 2008

submission deadline in claim number order showing their Recognized Claim amounts, estimated

Cash awards, and cstitnated Stock awards. The next portion of the printout lists all the rejected

or ine1i2ible Claimants and shows the reasons why their claims were rejected in claim number

order. For privacy reasons, the lists to be filed with the Court will provide only the claim

number and Recognized Claim amount or reason for ineligibility (no narnes, addresses or

Taxpayer LI). numbers are disclosed).

The estimated Cash awards for each Qualified Claimant are preliminary in nature and the exact amounts v, illfluctuate based upon the actual distributable amount which may change depending on factors such as accruedinterest. taxes owed, attorneys fees, and additional administrative expenses.

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18. A total of 278 persons or entities have filed claims herein. 262 timely and 16 after

the September 22, 2008 submission deadline, of which a total of 135 (timely and untimely) have

been provisionally accepted. All eligible claims, whether timely filed or late, are included in the

list of Qualified Claimants for this Court's review.

19. GCG has provisionally accepted 135 claims representing a total Recognized

Claim of $12.283,128.29 (including $12,262,244.39 from timely claims and $20,883.90 from

claims submitted after September 22, 2008). See Exhibit "D".

20. A total of 143 claims were rejected for the following reasons:

No. Of claims Reason for rejection

35 Claim Does Not Fit the Definition of the Settlement Class

13 Duplicate Claim

24 Deficient Never Cured

71 Claim Did Not Result in a Recognized Loss

21. Unless directed otherwise, GCG will continue to receive, review and process any

correspondence or information submitted by claimants with respect to their already-filed Proofs

of Claim. Should we receive adjustments to Proofs of Claim prior to distribution of the Net

Settlement Fund, we will update our claims database with the new information. GCG will then

report the updated totals to Plaintiffs' Co-Lead Counsel immediately prior to distribution.

ALLOCATION AND DISTRIBUTION OF FUNDS

22. In preparation of the allocation and distribution of the cash and stock portions of

the Net Settlement Fund, GCCi has taken the following preliminary steps:

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a) Calculated an estimated pro-rata cash award for each Qualified Claimant by

comparing the Qualified Claimants' total Recognized Claim to the Net

Settlement Fund.

b) Calculated a pro-rata stock award for each Qualified Claimant by comparing

the Qualified Claimants' total Recognized Claim to the 2,727,273 shares2

available for the distribution from the Net. Settlement Fund. For claims vvhere

the calculation produced a stock award including a fractional share, we

rounded that fractional share to a whole number,

c) Communicated with American Stock Transfer ("AST") to make the neeessar„,

arrangements for coordinating a stock allocation in the form of Workstream

common stock certificates. AST confirmed that they had the certificate

inventory to accommodate this task and provided GCG with the file format

that would need to be provided to AST in order for them to print and mail

stock certificates.

d) Generated a file in accordance with AST's requirements including all

Qualified Claimants and their respective share amounts, registration names,

and claimant addresses. The registration and address information was based

on available information provided by Qualified Claimants in their Proof of

C 1 ai m forms.

2 As per paragraph ,l(b)(i) of the Stipulation and Agreenient of Settlement, the number of Workstream commonstock shares is determined by dividing S600,000.00 by the -Average Closing Price" which shall be the average ofthe closing price of the Company common stock on the Nasdaq Global Market (or such other market or exchange onwhich the common stock is then traded) the (5) business days immediately precedin g execution by the Court of theFinal Order. GCG was advised that this calculation equaled 3,636,363 total Workstream shares and 909,090 shareswere held for attorneys fees resulting in 2,727,273 Workstream shares available for the distribution.

9

23. The stock portion of the Gross Settlement Fund has increased in value since its

deposit into the Class Escrow Account thus creating, at the present time, a taxable liability.

flowever, the actual amount of the taxable gain and the resulting tax liability, if any, will not be

known until the stock is distributed to the Class Members. Accordingly, it is recommended that

a two-staged distribution process take place. In the first stage, the stock award is distributed

pursuant to the pro rata determinations outlined above. This vvill fix the amount of the taxable

gain and thus permit the calculation and payment of the taxes on those gains. The payment of

those taxes will be paid from the cash portion of the Gross Settlement Fund. In the second stage,

the cash portion of the Gross Settlement Fund will be distributed, subject to thc payment of

taxes, Administrative Costs and the creation of a reserve of $20,000 to address any additional

and prospective Administrative Costs (including taxes, tax compliance. AST fees, and expenses

for printing and mailing stock certificates) that arise after the final distribution of funds.

QUALITY ASSURANCE

24. An integral part of the claims administration process is the Quality Assurance

("QA-) review. Once all of the claims have been processed, Notice of Rejection letters have

been mailed, and deficiency. , responses reviewed and processed, GCG's QA department performs

a final project wrap-up in order to ensure correctness and completeness of all processed claims

prior to preparing our final reports to Plaintiffs' Co-Lead Counsel. Itere. in connection with this

project, GCO: (i) determined that valid claims have no messages denoting ineligibility; (ii)

determined that claims that are ineligible have messages denoting ineligibility; (iii) determined

that claims that contained purchases and/or acquisitions that occurred outside of the Class Period

contain appropriate ineligible messages; (iv) determined that claim detail (transaction)

message(s) appear(s) only on claim detail records; (v) determined that all claims requiring Notice

10

of Rejection letters were sent such letters; (vi) performed a sample review of deficient claims;

(vii) re-viewed claims with large dollar losses of $10,000 or more; (viii) sampled claims that were

determined to be ineligible, including those with no Recognized Claim calculated in accordance

with the Plan of Allocation. in order to verify that all transactions had been captured correctly;

and (ix) tested the accuracy of the calculation program.

(}CG has spent the time necessary to do a thorough joh of processing the claims

and to protect the interests of the Class as a whole. No claims were rejected out-of-hand and

adequate time was spent communicating with Class Members and suggesting appropriate ways

they could document their claims and participate in the settleinent. Telephone calls and written

letters from claimants to GCG were courteously handled. Class Members were assisted to the

fullest extent possible.

26. lf the Court authorizes the distribution of the Net Settlement Fund, the GCG staff

will undertake the following tasks: (1) calculate the final stock pro rata distribution amounts

from the stock portion of the Gross Settlement Fund by comparing the Qualified Claimants' total

Recognized Claim with the total stock value of the 2,727273 shares available in the Class

Escrow Account: (2) send a formatted stock allocation file to AST to print and mail stock

certificates; (3) calculate the final cash pro rata distribution amounts from cash portion of the

Gross Settlement Fund by comparing the Qualified Claimants' total Recognized Claim with the

total dollar value of the Net Settlement Fund (following deductions for a reserve, expenses,

taxes, tax compliance. costs for distributing the stock award and any other Administrative Costs);

(4) prepare checks and cheek registers; and. (5) mail checks by prepaid first class mail.

Replacement checks will be issued upon request by any payee. We will also answer any

inquiries about claim calculations and checks.

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27. Co-Lead Counsel has recommended a reserve in the amount of $20,000 to be held

from the cash portion of the Gross Settlement Fund in order to address costs that may arise

following final distribution, including but not limited to attorneys' fees, additional administrative

expenses, taxes owed, fees for tax compliance, and expenses the printing and mailing of stock

certificates.

FEES AND EXPENSES

28. An invoice reflecting all of the fees and expenses incurred and to be incurred hy

GCG is annexed hereto as Exhibit "E". Additional prospective Administrative Costs include,

among others, taxes, tax compliance, AST fees, and expenses for printing and mailing stock

certificates.

RECORDS RETENTION AND DESTRUCTION

29. Unless otherwise ordered by the Court, one year after distribution of the

Settlement Fund, GCG will destroy the paper copies of the Proofs of Claim and all supporting

documentation, and three years after distribution of the Settlement Fund it will destroy electronic

copies of the sante.

!tephe . Cirami

Sworn to before inc this20th day of April, 2009

Notary Public

VANESSA M. ViG1LANTENotary Public, Ste of New York

N. 01V6143817Ouafified in Queers County

My Commission Expires L1

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