EXHIBIT 10.72

 
AMENDED AND RESTATED WARRANT ACKNOWLEDGEMENT
 
This Amended and Restated Warrant Acknowledgement is made effective as of August
29, 2008 by and between BPO Management Servcies, Inc., a Delaware corporation
(together with its successors and assigns, the “Issuer”), and certain Investors
(as defined below), whose names are indicated on the signature page hereto.
 
RECITALS
 
WHEREAS, the Issuer and certain investors (each an “Investor” and collectively,
the “Investors”) previously entered into a Series A Warrant to Purchase Shares
of Common Stock of BPO Management Services, Inc. issued June 13, 2007, Series B
Warrant to Purchase Shares of Common Stock of BPO Management Services, Inc.
issued June 13, 2007, Series C Warrant to Purchase Shares of Common Stock of BPO
Management Services, Inc. issued June 13, 2007, and Series D Warrant to Purchase
Shares of Common Stock of BPO Management Services, Inc. issued June 13, 2007
(the “Original Warrants”);
 
WHEREAS, certain terms of certain of the Original Warrants were amended in
respect of the Company and certain of the Investors;
 
WHEREAS, each of the Original Warrants provides for certain anti-dilution
protection in the event that the Issuer issues any shares of its Common Stock
(as defined therein) or any warrants to purchase its Common Stock for a
per-share price less than the then-current “Warrant Price” for such Warrant (the
“Price Protections”);
 
 
WHEREAS, the Issuer desires to make certain additional amendments to certain of
the Original Warrants by amending and restating the same (the “Amended and
Restated Warrants”);
 
WHEREAS, Section 11 of the Original Warrants provides that any provision of the
Original Warrants may be amended or waived with the prior written approval of
the Issuer and the holders of a majority of the warrant shares issuable upon the
exercise of the Original Warrants; and
 
WHEREAS, the Issuer and each of the Investors who execute this Aemended and
Restated Warrant Acknowledgement, by their respective signature below, desire to
memorialize their approval of the Amended and Restated Warrants, and all
amendments made therein.
 
ARTICLE 1
AGREEMENT

NOW, THEREFORE, in consideration of the covenants and conditions herein
contained, the Issuer and each of the Investors whose signatures appear below
(the “Signing Investors”) hereby agree as follows:
 

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1.1           Agreement.  The Issuer and each of the Signing Investors whose
signatures appear below approve the amendment and restatement of the Original
Warrants in the forms attached hereto as:
 
(a)           Exhibit A (Amended and Restated Series A Warrant to Purchase
Shares of Common Stock of BPO Management Services, Inc.);
 
(b)           Exhibit B (Amended and Restated Series B Warrant to Purchase
Shares of Common Stock of BPO Management Services, Inc.);
 
(c)           Exhibit C (Amended and Restated Series C Warrant to Purchase
Shares of Common Stock of BPO Management Services, Inc.); and
 
(d)           Exhibit D (Amended and Restated Series D Warrant to Purchase
Shares of Common Stock of BPO Management Services, Inc.).
 
ARTICLE 2
MISCELLANEOUS PROVISIONS.
 
2.1           No Further Agreements/Waivers.  Except as set forth herein and as
previously amended, the Original Warrants, as previously amended, and the
provisions of this Amended and Restated Warrant Acknowledgment, the provisions
hereof shall prevail.
 
2.2           Counterparts.  This Amended and Restated Warrant Acknowledgment
may be executed in one or more counterparts, each of which shall be deemed an
original but all of which when taken together shall constitute one and the same
instrument.  Facsimiles or portable document files transmitted by e-mail
containing original signatures shall be deemed for all purposes to be originally
signed copies of the documents which are the subject of such facsimiles or
files.
 
2.3           Binding on Successors. This Amended and Restated Warrant
Acknowledgment shall be binding upon and shall inure to the benefit of the
successors and permitted assigns of the Issuer and the Signing Investors.
 
2.4           Entire Agreement.  The Original Warrant Agreements and the Amended
and Restated Warrant Acknowledgment, all as may have been previously amended,
and as reflective of the terms hereof, contain the entire understanding between
the parties hereto and supersede any prior written or oral agreements between
them respecting the subject matter contained herein.  There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties relating to the subject matter hereof that are not fully
expressed herein.
 
[Signatures on following page(s).]

 
 

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IN WITNESS WHEREOF, the undersigned have caused this Amended and Restated
Warrant Acknowledgement to be duly executed by their respective authorized
officers as of the date first above written.
 
 

 
COMPANY:
     
BPO Management Services, Inc.
         
By:  
 
Name:
Title:
         
INVESTOR:
      By:    
Name:
Title:

 
 
 

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Exhibit A
 
 
 
THIS AMENDED AND RESTATED WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
AMENDED AND RESTATED SERIES A WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

BPO MANAGEMENT SERVICES, INC.

Expires June 13, 2010
 

No.: W-A-07- __  
Number of Shares: ___________
Date of Issuance: June 13, 2007   

 
 
FOR VALUE RECEIVED, the undersigned, BPO Management Services, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that _______________________________ or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set
forth.  Capitalized terms used in this Warrant and not otherwise defined herein
shall have the respective meanings specified in Section 9 hereof.
 
1.    Term.  The term of this Warrant shall commence on June 13, 2007 and shall
expire at 6:00 p.m., eastern time, on June 13, 2010 (such period being the
"Term").
 
2.    Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
(a)    Time of Exercise.  The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term.
 
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(b)    Method of Exercise.  The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
 
(c)    Cashless Exercise.  Notwithstanding any provisions herein to the contrary
and commencing one and a half (1.5) years following the Original Issue Date if
(i) the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, unless the
registration statement is not effective as a result of the Issuer exercising its
rights under Section 3(n) of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
 
X = Y - (A)(Y)
    B
 
 
Where
X =
the number of shares of Common Stock to be issued to the Holder.
           
Y =
 
the number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised. 
           
A = 
the Warrant Price. 
           
B = 
the Per Share Market Value of one share of Common Stock. 

 

(d)    Issuance of Stock Certificates.  In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding three (3) Trading Days after such exercise (the “Delivery
Date”) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then
in effect), issued and delivered to the Depository Trust Company (“DTC”) account
on the Holder’s behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”)
 
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within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise.  Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
and the Issuer and its transfer agent are participating in DTC through the DWAC
system.  The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised.  With respect to
partial exercises of this Warrant, the Issuer shall keep written records of the
number of shares of Warrant Stock exercised as of each date of exercise.
 
(e)    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.  In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000.  The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
 
(f)    Transferability of Warrant.  Subject to Section 2(h) hereof, this Warrant
may be transferred by a Holder, in whole or in part, without the consent of the
Issuer.  If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer.  This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange.  All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
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(g)    Continuing Rights of Holder.  The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
(h)    Compliance with Securities Laws.
 
(i)    The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
 
(ii)    Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
(iii)   The Issuer agrees to reissue this Warrant or certificates representing
any of the Warrant Stock, without the legend set forth above if at such time,
prior to making any transfer of any such securities, the Holder shall give
written notice to the Issuer describing the manner and terms of such
transfer.  Such proposed transfer will not be effected until: (a) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the Securities Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act and the Holder has represented that the
Warrant Stock has been or will be sold, (iii) the
 
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Issuer has received other evidence reasonably satisfactory to the Issuer that
such registration and qualification under the Securities Act and state
securities laws are not required, or (iv) the Holder provides the Issuer with
reasonable assurances that such security can be sold pursuant to Rule 144 under
the Securities Act; and (b) either (i) the Issuer has received an opinion of
counsel reasonably satisfactory to the Issuer, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto.  The Issuer will respond to any such
notice from a holder within five (5) Trading Days.  In the case of any proposed
transfer under this Section 2(h), the Issuer will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or “blue sky” laws of any state for which
registration by coordination is unavailable to the Issuer.  The restrictions on
transfer contained in this Section 2(h) shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Warrant.  Whenever a certificate representing the Warrant Stock
is required to be issued to a the Holder without a legend, in lieu of delivering
physical certificates representing the Warrant Stock, the Issuer shall use its
reasonable best efforts to cause its transfer agent to electronically transmit
the Warrant Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its DWAC system (to the extent not inconsistent with any
provisions of this Warrant or the Purchase Agreement).  Notwithstanding the
foregoing to the contrary, the Issuer or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on a holder’s behalf via
DWAC if such exercise is in connection with a sale and the Issuer and its
transfer agent are participating in DTC through the DWAC system.
 
(i)    Accredited Investor Status.  In no event may the Holder exercise this
Warrant in whole or in part unless the Holder is then an “accredited investor”
as defined in Regulation D under the Securities Act.
 
3.    Stock Fully Paid; Reservation and Listing of Shares; Covenants.
 
(a)    Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the
Issuer.  The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock issuable upon
exercise of this Warrant.
 
(b)    Reservation.  If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so
listed.  The Issuer will also so list on each securities exchange or market, and
will maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.
 
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(c)    Loss, Theft, Destruction of Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
 
4.    Adjustment of Warrant Price and Number of Shares Issuable Upon
Exercise.  The Warrant Price and the Warrant Share Number shall be subject to
adjustment from time to time as set forth in this Section 4.  The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
 
(a)    Recapitalization, Reorganization, Reclassification, Consolidation, Merger
or Sale.
 
(i)    In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate or merge with or into
any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made to the
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the
consummation of such Triggering Event, in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such Triggering Event, the Securities, to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto.  Immediately upon the occurrence of a
Triggering Event, the Issuer shall notify the Holder in writing of such
Triggering Event and
provide the calculations in determining the number of shares of Warrant Stock
issuable upon exercise of the new warrant and the adjusted Warrant Price.  Upon
the Holder’s request, the continuing or surviving corporation as a result of
such Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i).  Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant to
the Securities Exchange Act of 1934, as amended, and its common stock is listed
or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board.  In the event that the surviving entity pursuant to
any such Triggering Event is not a public company that is registered pursuant to
the Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to demand
that the Issuer pay to the Holder an amount in cash equal to the value of this
Warrant as of the date of the Triggering Event calculated in accordance with the
Black-Scholes formula.
 
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(ii)    In the event that the Holder has elected not to exercise this Warrant
prior to the consummation of a Triggering Event, so long as the surviving entity
pursuant to any Triggering Event is a company that has a class of equity
securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and its common stock is listed or quoted on a national securities
exchange, national automated quotation system or the OTC Bulletin Board, the
surviving entity and/or each Person (other than the Issuer) which may be
required to deliver any Securities upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities as, in
accordance with the foregoing provisions of this subsection (a), such Holder
shall be entitled to receive, and the surviving entity and/or each such Person
shall have similarly delivered to such Holder an opinion of counsel for the
surviving entity and/or each such Person, which counsel shall be reasonably
satisfactory to such Holder, or in the alternative, a written acknowledgement
executed by the President or Chief Financial Officer of the Issuer, stating that
this Warrant Amended Warrant shall thereafter continue in full force and effect
and the terms hereof (including, without limitation, all of the provisions of
this subsection (a)) shall be applicable to the Securities which the surviving
entity and/or each such Person may be required to deliver upon any exercise of
this Warrant or the exercise of any rights pursuant hereto.
 
(b)    Subdivisions and Combinations.  If at any time the Issuer shall:
 
(i)    subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(ii)    combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant Price
then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
 
(c)    Other Provisions applicable to Adjustments under this Section.  The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
 
(i)    When Adjustments to Be Made.  The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment.  Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made(x) as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or (y) on the date of exercise.  For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
 
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(ii)    Fractional Interests.  In computing ad-justments under this Section 4,
fractional interests in Common Stock shall be taken into account to the near-est
one one-hundredth (1/100th) of a share.
 
(d)    Form of Warrant after Adjustments.  The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
 
5.    Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.  Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection.  The
firm selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters to
the Issuer and such Holder within thirty (30) days after submission to it of
such dispute.  Such opinion shall be final and binding on the parties
hereto.  The costs and expenses of the initial accounting firm shall be paid
equally by the Issuer and the Holder and, in the case of an objection by the
Issuer, the costs and expenses of the subsequent accounting firm shall be paid
in full by the Issuer.
 
6.    Fractional Shares.  No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall round the number of shares to be issued upon exercise up to the
nearest whole number of shares.
 
7.    Ownership Cap and Exercise Restriction.  Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of
Common Stock owned by such Holder and its affiliates at such time, the number of
shares of Common Stock which would result in such Holder and its affiliates
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and
outstanding shares of Common Stock; provided, however, that upon a holder of
this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 7 with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7 will be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.  Notwithstanding the foregoing, these exercise restrictions
shall not be applicable to Renaissance Capital Group, Inc.  and its affiliates
(collectively, "Renn"), if Renn so notifies the Issuer (either in writing or by
email) prior to the date of issuance of the securities to which this paragraph
is applicable.
 
8.    Definitions.  For the purposes of this Warrant, the following terms have
the following meanings:
 
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“Board" shall mean the Board of Directors of the Issuer.
 
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
 
"Certificate of Designation" means the Certificate of Designation of the
Relative Rights and Preferences of the Series D Convertible Preferred Stock of
the Issuer as in effect on the Original Issue Date, and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Common Stock" means the Common Stock, $0.01 par value per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
 
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
 
"Holders" mean the Persons who shall from time to time own any Warrant.  The
term "Holder" means one of the Holders.
 
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
 
"Issuer" means BPO Management Services, Inc., a Delaware corporation, and its
successors.
 
"Majority Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the then-outstanding
Warrants.
 
"Original Issue Date" means June 13, 2007.
 
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
 
"Other Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
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“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.
 
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
 
"Per Share Market Value" means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on the OTC Bulletin Board or a
registered national stock exchange on which the Common Stock is then listed, or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not quoted or listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in Pink Sheets, LLC or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the OTC Bulletin Board or Pink Sheets,
LLC (or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the applicable Trading
Days preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the determination
by such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Independent Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.  The determination of fair market value by an
Independent Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors determinative of value, and
shall be final and binding on all parties.  In determining the fair market value
of any shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by federal
or state securities laws, or to the existence or absence of, or any limitations
on, voting rights.
 
"Purchase Agreement" means the Series D Convertible Preferred Stock Purchase
Agreement dated as of June 13, 2007, among the Issuer and the Purchasers.
 
"Purchasers" means the purchasers of the Series D Convertible Preferred Stock
and the Warrants issued by the Issuer pursuant to the Purchase Agreement.
 
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security.  "Security" means one of the Securities.
 
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
 
"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
 
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"Term" has the meaning specified in Section 1 hereof.
 
"Trading Day" means (a) a day on which the Common Stock is quoted on the OTC
Bulletin Board, or (b) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by Pink Sheets, LLC (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
 
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board (or
other governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.
 
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants.
 
"Warrant Price" initially means $0.90, as such price may be adjusted from time
to time in accordance with the adjustments specified in this Warrant, including
Section 4 hereto.
 
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
 
"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
 
9.    Other Notices.  In case at any time:
 
 
(A)
the Issuer shall make any distributions to the holders of Common Stock; or

 
 
(B)
the Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 
 
(C)
there shall be any reclassification of the Capital Stock of the Issuer; or

 
 
(D)
there shall be any capital reorganization by the Issuer; or

 
11

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(E)
there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

 
 
(F)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;

 
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take
place.  Such notice also shall specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall
be given at least twenty (20) days prior to the action in question and not less
than ten (10) days prior to the record date or the date on which the Issuer's
transfer books are closed in respect thereto.  This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
 
10.   Amendment and Waiver.  Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance), by a written instrument or written instruments
executed by the Issuer and the Majority Holders; provided, however, that no such
amendment or waiver shall reduce the Warrant Share Number, increase the Warrant
Price, shorten the period during which this Warrant may be exercised or modify
any provision of this Section 10 without the consent of the Holder of this
Warrant.  No consideration shall be offered or paid to any person to amend or
consent to a waiver or modification of any provision of this Warrant unless the
same consideration is also offered to all holders of the Warrants.
 
11.   Governing Law; Jurisdiction.  This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted.  The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue.  The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New
York.  The Issuer and the Holder consent to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 12 shall affect or limit any right to serve
process in any other manner permitted by law.  The Issuer and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to this Warrant or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.  The
parties hereby waive all rights to a trial by jury.
 
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12.   Notices.  Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or delivery by telecopy, e-mail or facsimile at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.  The addresses for such communications
shall be:
 
If to the Issuer:
BPO Management Services, Inc.
1290 N.  Hancock, Ste 200
Anaheim, CA 92807
Attention: Chief Executive Officer
Tel.  No.: (714) 974-2670
Fax No.: (714) 974-4771
E-mail: patrick.dolan@bpoms.com

with copies (which copies shall not constitute notice) to:

Bryan Cave LLP
3161 Michelson Drive, Suite 1500
Irvine, CA 92612
Attention: Randolf W.  Katz, Esq.
Tel.  No.: (949) 223-7103
Fax No.: (949) 223-7100
E-mail: rwkatz@bryancavellp.com

and
Cornman & Swartz
19800 MacArthur Blvd., Suite 820
Irvine, CA 92612
Attention: Jack T.  Cornman, Esq.
Tel.  No.: (949) 224-1500
Fax No.: (949) 224-1505

If to any Holder: At the address of such Holder set forth on Exhibit A to the
Purchase Agreement or as specified in writing by such Holder with copies to:

Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 
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13.   Warrant Agent.  The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
 
14.   Remedies.  The Issuer stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Issuer in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.
 
15.   Successors and Assigns.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
 
16.   Modification and Severability.  If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.  If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
 
17.   Headings.  The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 

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IN WITNESS WHEREOF, the Issuer has executed this Amended and Restated Series A
Warrant as of the day and year first above written.
 

 

 
BPO MANAGEMENT SERVICES, INC.

By:       ____________________________
Name:
Title: 

 
 

 
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EXERCISE FORM
AMENDED AND RESTATED SERIES A WARRANT

BPO MANAGEMENT SERVICES, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of BPO
Management Services, Inc.  covered by the within Warrant.
 
Dated: _________________
 

 
Signature       ________________________________
Address         ________________________________
                        ________________________________    

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
 
The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
 
The undersigned intends that payment of the Warrant Price shall be made as
(check one):
 
Cash Exercise_______
 
Cashless Exercise_______
 
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$________ by certified or official bank check (or via wire transfer) to the
Issuer in accordance with the terms of the Warrant.
 
If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is ___________.  The Issuer
shall pay a cash adjustment in respect of the fractional portion of the product
of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of
exercise, which product is ____________.
 
X = Y - (A)(Y)
                 B

Where:
 
The number of shares of Common Stock to be issued to the Holder
__________________(“X”).
 
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The number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised ___________________________ (“Y”).
 
The Warrant Price ______________ (“A”).
 
The Per Share Market Value of one share of Common Stock _______________________
(“B”).
 
ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature       ________________________________
Address         ________________________________
                        ________________________________    

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature       ________________________________
Address         ________________________________
                        ________________________________    

FOR USE BY THE ISSUER ONLY:

This Warrant No.  W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No.  W-_____ issued for ____ shares of Common Stock in
the name of _______________.
 
 

 
 
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Exhibit B
 
 
 
THIS AMENDED AND RESTATED WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

AMENDED AND RESTATED SERIES B WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

BPO MANAGEMENT SERVICES, INC.

Expires June 13, 2012
 

 

No.: W-B-07- __
Number of Shares: ___________

Date of Issuance: June 13, 2007

FOR VALUE RECEIVED, the undersigned, BPO Management Services, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that _______________________________ or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set
forth.  Capitalized terms used in this Warrant and not otherwise defined herein
shall have the respective meanings specified in Section 9 hereof.
 
1.    Term.  The term of this Warrant shall commence on June 13, 2007 and shall
expire at 6:00 p.m., eastern time, on June 13, 2012 (such period being the
"Term").
 
2.    Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
(a)    Time of Exercise.  The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term.
 
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(b)    Method of Exercise.  The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
 
(c)    Cashless Exercise.  Notwithstanding any provisions herein to the contrary
and commencing one and a half (1.5) years following the Original Issue Date if
(i) the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, unless the
registration statement is not effective as a result of the Issuer exercising its
rights under Section 3(n) of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
 
X = Y - (A)(Y)
 
B
 
 
Where
X =
the number of shares of Common Stock to be issued to the Holder.

 
 
Y =
the number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised.

 
 
A =
the Warrant Price.

 
 
B =
the Per Share Market Value of one share of Common Stock.

 
(d)    Issuance of Stock Certificates.  In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding three (3) Trading Days after such exercise (the “Delivery
Date”) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then
in effect), issued and delivered to the Depository Trust Company (“DTC”) account
on the Holder’s behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”)
 
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within a reasonable time, not exceeding three (3) Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant Stock so purchased as of the date of such
exercise.  Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
and the Issuer and its transfer agent are participating in DTC through the DWAC
system.  The Holder shall deliver this original Warrant, or an indemnification
undertaking with respect to such Warrant in the case of its loss, theft or
destruction, at such time that this Warrant is fully exercised.  With respect to
partial exercises of this Warrant, the Issuer shall keep written records of the
number of shares of Warrant Stock exercised as of each date of exercise.
 
(e)    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.  In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000.  The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
 
(f)    Transferability of Warrant.  Subject to Section 2(h) hereof, this Warrant
may be transferred by a Holder, in whole or in part, without the consent of the
Issuer.  If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer.  This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange.  All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
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(g)    Continuing Rights of Holder.  The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
(h)    Compliance with Securities Laws.
 
(i)    The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
 
(ii)    Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
(iii)    The Issuer agrees to reissue this Warrant or certificates representing
any of the Warrant Stock, without the legend set forth above if at such time,
prior to making any transfer of any such securities, the Holder shall give
written notice to the Issuer describing the manner and terms of such
transfer.  Such proposed transfer will not be effected until: (a) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the Securities Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act and the Holder has represented that the
Warrant Stock has been or will be sold, (iii) the
 
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Issuer has received other evidence reasonably satisfactory to the Issuer that
such registration and qualification under the Securities Act and state
securities laws are not required, or (iv) the Holder provides the Issuer with
reasonable assurances that such security can be sold pursuant to Rule 144 under
the Securities Act; and (b) either (i) the Issuer has received an opinion of
counsel reasonably satisfactory to the Issuer, to the effect that registration
or qualification under the securities or "blue sky" laws of any state is not
required in connection with such proposed disposition, or (ii) compliance with
applicable state securities or "blue sky" laws has been effected or a valid
exemption exists with respect thereto.  The Issuer will respond to any such
notice from a holder within five (5) Trading Days.  In the case of any proposed
transfer under this Section 2(h), the Issuer will use reasonable efforts to
comply with any such applicable state securities or "blue sky" laws, but shall
in no event be required, (x) to qualify to do business in any state where it is
not then qualified, (y) to take any action that would subject it to tax or to
the general service of process in any state where it is not then subject, or (z)
to comply with state securities or “blue sky” laws of any state for which
registration by coordination is unavailable to the Issuer.  The restrictions on
transfer contained in this Section 2(h) shall be in addition to, and not by way
of limitation of, any other restrictions on transfer contained in any other
section of this Warrant.  Whenever a certificate representing the Warrant Stock
is required to be issued to a the Holder without a legend, in lieu of delivering
physical certificates representing the Warrant Stock, the Issuer shall use its
reasonable best efforts to cause its transfer agent to electronically transmit
the Warrant Stock to the Holder by crediting the account of the Holder's Prime
Broker with DTC through its DWAC system (to the extent not inconsistent with any
provisions of this Warrant or the Purchase Agreement).  Notwithstanding the
foregoing to the contrary, the Issuer or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on a holder’s behalf via
DWAC if such exercise is in connection with a sale and the Issuer and its
transfer agent are participating in DTC through the DWAC system.
 
(i)    Accredited Investor Status.  In no event may the Holder exercise this
Warrant in whole or in part unless the Holder is then an “accredited investor”
as defined in Regulation D under the Securities Act.
 
3.    Stock Fully Paid; Reservation and Listing of Shares; Covenants.
 
(a)    Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the
Issuer.  The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock issuable upon
exercise of this Warrant.
 
(b)    Reservation.  If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent
 
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permissible under the applicable securities exchange rules, all unissued shares
of Warrant Stock which are at any time issuable hereunder, so long as any shares
of Common Stock shall be so listed.  The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.
 
(c)    Loss, Theft, Destruction of Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
 
4.    Adjustment of Warrant Price and Number of Shares Issuable Upon
Exercise.  The Warrant Price and the Warrant Share Number shall be subject to
adjustment from time to time as set forth in this Section 4.  The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
 
(a)    Recapitalization, Reorganization, Reclassification, Consolidation, Merger
or Sale.
 
(i)    In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate or merge with or into
any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made to the
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the
consummation of such Triggering Event, in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such Triggering Event, the Securities, to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto.  Immediately upon the occurrence of a
Triggering Event, the Issuer shall notify the Holder in writing of such
Triggering Event and
 
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provide the calculations in determining the number of shares of Warrant Stock
issuable upon exercise of the new warrant and the adjusted Warrant Price.  Upon
the Holder’s request, the continuing or surviving corporation as a result of
such Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i).  Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant to
the Securities Exchange Act of 1934, as amended, and its common stock is listed
or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board.  In the event that the surviving entity pursuant to
any such Triggering Event is not a public company that is registered pursuant to
the Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to demand
that the Issuer pay to the Holder an amount in cash equal to the value of this
Warrant as of the date of the Triggering Event calculated in accordance with the
Black-Scholes formula.
 
(ii)    In the event that the Holder has elected not to exercise this Warrant
prior to the consummation of a Triggering Event, so long as the surviving entity
pursuant to any Triggering Event is a company that has a class of equity
securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and its common stock is listed or quoted on a national securities
exchange, national automated quotation system or the OTC Bulletin Board, the
surviving entity and/or each Person (other than the Issuer) which may be
required to deliver any Securities, upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities as, in
accordance with the foregoing provisions of this subsection (a), such Holder
shall be entitled to receive, and the surviving entity and/or each such Person
shall have similarly delivered to such Holder an opinion of counsel for the
surviving entity and/or each such Person, which counsel shall be reasonably
satisfactory to such Holder, or in the alternative, a written acknowledgement
executed by the President or Chief Financial Officer of the Issuer, stating that
this Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this subsection
(a)) shall be applicable to the Securities, which the surviving entity and/or
each such Person may be required to deliver upon any exercise of this Warrant or
the exercise of any rights pursuant hereto.
 
(b)    Subdivisions and Combinations.  If at any time the Issuer shall:
 
(i)    subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(ii)    combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder
 
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of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant Price
then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
 
(c)    Other Provisions applicable to Adjustments under this Section.  The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
 
(i)    When Adjustments to Be Made.  The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment.  Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made(x) as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or (y) on the date of exercise.  For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
 
(ii)    Fractional Interests.  In computing ad-justments under this Section 4,
fractional interests in Common Stock shall be taken into account to the near-est
one one-hundredth (1/100th) of a share.
 
(d)    Form of Warrant after Adjustments.  The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
 
5.    Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.  Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection.  The
firm selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters to
the Issuer and such Holder within thirty (30) days after submission to it of
such dispute.  Such opinion shall be final and binding on the parties
hereto.  The costs and expenses of the initial accounting firm shall be paid
equally by the Issuer and the Holder and, in the case of an objection by the
Issuer, the costs and expenses of the subsequent accounting firm shall be paid
in full by the Issuer.
 
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6.    Fractional Shares.  No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall round the number of shares to be issued upon exercise up to the
nearest whole number of shares.
 
7.    Ownership Cap and Exercise Restriction.  Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of
Common Stock owned by such Holder and its affiliates and its affiliates at such
time, the number of shares of Common Stock which would result in such Holder and
its affiliates beneficially owning (as determined in accordance with Section
13(d) of the Exchange Act and the rules thereunder) in excess of 9.99% of the
then issued and outstanding shares of Common Stock; provided, however, that upon
a holder of this Warrant providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) (the "Waiver Notice") that such Holder would
like to waive this Section 7 with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 7 will be of no force or
effect with regard to all or a portion of the Warrant referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant.  Notwithstanding the foregoing, these exercise
restrictions shall not be applicable to Renaissance Capital Group, Inc.  and its
affiliates (collectively, "Renn"), if Renn so notifies the Issuer (either in
writing or by email) prior to the date of issuance of the securities to which
this paragraph is applicable.
 
8.    Definitions.  For the purposes of this Warrant, the following terms have
the following meanings:
 
 “Board" shall mean the Board of Directors of the Issuer.
 
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
 
"Certificate of Designation" means the Certificate of Designation of the
Relative Rights and Preferences of the Series D Convertible Preferred Stock of
the Issuer as in effect on the Original Issue Date, and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
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"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Common Stock" means the Common Stock, $0.01 par value per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
 
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
 
"Holders" mean the Persons who shall from time to time own any Warrant.  The
term "Holder" means one of the Holders.
 
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
 
"Issuer" means BPO Management Services, Inc., a Delaware corporation, and its
successors.
 
"Majority Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the then-outstanding
Warrants.
 
"Original Issue Date" means June 13, 2007.
 
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
 
"Other Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.
 
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
 
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"Per Share Market Value" means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on the OTC Bulletin Board or a
registered national stock exchange on which the Common Stock is then listed, or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not quoted or listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in Pink Sheets, LLC or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the OTC Bulletin Board or Pink Sheets,
LLC (or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the applicable Trading
Days preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the determination
by such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Independent Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.  The determination of fair market value by an
Independent Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors determinative of value, and
shall be final and binding on all parties.  In determining the fair market value
of any shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by federal
or state securities laws, or to the existence or absence of, or any limitations
on, voting rights.
 
"Purchase Agreement" means the Series D Convertible Preferred Stock Purchase
Agreement dated as of June 13, 2007, among the Issuer and the Purchasers.
 
"Purchasers" means the purchasers of the Series D Convertible Preferred Stock
and the Warrants issued by the Issuer pursuant to the Purchase Agreement.
 
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security.  "Security" means one of the Securities.
 
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
 
"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
 
"Term" has the meaning specified in Section 1 hereof.
 
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"Trading Day" means (a) a day on which the Common Stock is quoted on the OTC
Bulletin Board, or (b) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by Pink Sheets, LLC (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
 
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board (or
other governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.
 
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants.
 
"Warrant Price" initially means $1.25, as such price may be adjusted from time
to time in accordance with the adjustments specified in this Warrant, including
Section 4 hereto.
 
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
 
"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
 
9.    Other Notices.  In case at any time:
 
 
(A)
the Issuer shall make any distributions to the holders of Common Stock; or

 
 
(B)
the Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 
 
(C)
there shall be any reclassification of the Capital Stock of the Issuer; or

 
 
(D)
there shall be any capital reorganization by the Issuer; or

 
 
(E)
there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

 
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(F)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;

 
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take
place.  Such notice also shall specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall
be given at least twenty (20) days prior to the action in question and not less
than ten (10) days prior to the record date or the date on which the Issuer's
transfer books are closed in respect thereto.  This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
 
10.    Amendment and Waiver.  Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 10 without the consent of the Holder of this Warrant.  No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of this Warrant unless the same consideration is
also offered to all holders of the Warrants.
 
11.    Governing Law; Jurisdiction.  This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted.  The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue.  The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New
York.  The Issuer and the Holder consent to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 12 shall affect or limit any right to serve
process in any other manner permitted by law.  The Issuer and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to this Warrant or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.  The
parties hereby waive all rights to a trial by jury.
 
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12.    Notices.  Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or delivery by telecopy, e-mail or facsimile at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.  The addresses for such communications
shall be:
 

If to the Issuer:
BPO Management Services, Inc.
1290 N.  Hancock, Ste 200
Anaheim, CA 92807
Attention: Chief Executive Officer
Tel.  No.: (714) 974-2670
Fax No.: (714) 974-4771
E-mail: patrick.dolan@bpoms.com

 
with copies (which copies shall not constitute notice) to:
 

 
Bryan Cave LLP
3161 Michelson Drive, Suite 1500
Irvine, CA 92612
Attention: Randolf W.  Katz, Esq.
Tel.  No.: (949) 223-7103
Fax No.: (949) 223-7100
E-mail: rwkatz@bryancavellp.com
    and    
Cornman & Swartz
19800 MacArthur Blvd., Suite 820
Irvine, CA 92612
Attention: Jack T.  Cornman, Esq.
Tel.  No.: (949) 224-1500
Fax No.: (949) 224-1505

 
If to any Holder: At the address of such Holder set forth on Exhibit A to the
Purchase Agreement or as specified in writing by such Holder with copies to:
 
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 
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13.    Warrant Agent.  The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
 
14.    Remedies.  The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
 
15.    Successors and Assigns.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
 
16.    Modification and Severability.  If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.  If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
 
17.    Headings.  The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
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IN WITNESS WHEREOF, the Issuer has executed this Amended and Restated Series B
Warrant as of the day and year first above written.
 
 

 
BPO MANAGEMENT SERVICES, INC.
 
By:___________________________
Name:
Title:

 
 
 
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EXERCISE FORM
SERIES B WARRANT
 
BPO MANAGEMENT SERVICES, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of BPO
Management Services, Inc.  covered by the within Warrant.
 
Dated: _________________
 

 
Signature   _________________________
Address     _________________________
_________________________

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: ______________
 
The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
 
The undersigned intends that payment of the Warrant Price shall be made as
(check one):
 
Cash Exercise_______
 
Cashless Exercise_______
 
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$________ by certified or official bank check (or via wire transfer) to the
Issuer in accordance with the terms of the Warrant.
 
If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is ___________.  The Issuer
shall pay a cash adjustment in respect of the fractional portion of the product
of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of
exercise, which product is ____________.
 
X = Y - (A)(Y)
B

Where:
 
The number of shares of Common Stock to be issued to the Holder
__________________(“X”).
 
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The number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised ___________________________ (“Y”).
 
The Warrant Price ______________ (“A”).
 
The Per Share Market Value of one share of Common Stock _______________________
(“B”).
 
 
ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature   _________________________
Address     _________________________
_________________________

 
 
PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature   _________________________
Address     _________________________
_________________________

 

FOR USE BY THE ISSUER ONLY:

This Warrant No.  W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No.  W-_____ issued for ____ shares of Common Stock in
the name of _______________.
 
 

 
 
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Exhibit C
 
 
THIS AMENDED AND RESTATED WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
AMENDED AND RESTATED SERIES C WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

BPO MANAGEMENT SERVICES, INC.

Expires June 13, 2010
 

No.: W-C-07- __  
Number of Shares: ___________
Date of Issuance: June 13, 2007   

 

FOR VALUE RECEIVED, the undersigned, BPO Management Services, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that _______________________________ or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to ____________________________________ (_____________) shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set
forth.  Capitalized terms used in this Warrant and not otherwise defined herein
shall have the respective meanings specified in Section 9 hereof.
 
1.    Term.  The term of this Warrant shall commence on June 13, 2007 and shall
expire at 6:00 p.m., eastern time, on June 13, 2010 (such period being the
"Term").
 
2.    Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
(a)    Time of Exercise.  The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term for such number of shares of
Common Stock equal to fifty percent (50%) of the number of shares of Common
Stock issuable upon conversion of the shares of preferred stock of the Issuer
that have been exercised by the Holder pursuant to the Series J Warrant granted
by the Issuer to the Holder pursuant to the Purchase Agreement.
 
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(b)    Method of Exercise.  The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
 
(c)    Cashless Exercise.  Notwithstanding any provisions herein to the contrary
and commencing one and a half (1.5) years following the Original Issue Date if
(i) the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, unless the
registration statement is not effective as a result of the Issuer exercising its
rights under Section 3(n) of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
 
X = Y - (A)(Y)
                                  B
 
 
Where
X =
the number of shares of Common Stock to be issued to the Holder.
           
Y =
 
the number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised. 
           
A = 
the Warrant Price. 
           
B = 
the Per Share Market Value of one share of Common Stock. 

 

(d)    Issuance of Stock Certificates.  In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding three (3) Trading Days after such exercise (the “Delivery
Date”) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then
in effect), issued and delivered to the Depository Trust Company (“DTC”) account
on the Holder’s behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after
such exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant
 
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Stock so purchased as of the date of such exercise.  Notwithstanding the
foregoing to the contrary, the Issuer or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on a holder’s behalf via
DWAC if such exercise is in connection with a sale and the Issuer and its
transfer agent are participating in DTC through the DWAC system.  The Holder
shall deliver this original Warrant, or an indemnification undertaking with
respect to such Warrant in the case of its loss, theft or destruction, at such
time that this Warrant is fully exercised.  With respect to partial exercises of
this Warrant, the Issuer shall keep written records of the number of shares of
Warrant Stock exercised as of each date of exercise.
 
(e)    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.  In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000.  The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
 
(f)    Transferability of Warrant.  Subject to Section 2(h) hereof, this Warrant
may be transferred by a Holder, in whole or in part, without the consent of the
Issuer.  If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer.  This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange.  All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
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(g)    Continuing Rights of Holder.  The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
(h)    Compliance with Securities Laws.
 
(i)    The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
 
(ii)    Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
(iii)   The Issuer agrees to reissue this Warrant or certificates representing
any of the Warrant Stock, without the legend set forth above if at such time,
prior to making any transfer of any such securities, the Holder shall give
written notice to the Issuer describing the manner and terms of such
transfer.  Such proposed transfer will not be effected until: (a) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the Securities Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act and the Holder has represented that the
Warrant Stock has been or will be sold, (iii) the Issuer has received other
evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the Holder provides the Issuer with reasonable assurances that
such security can be sold pursuant to Rule 144 under the Securities Act; and (b)
either (i) the Issuer has received an opinion of counsel reasonably satisfactory
to the Issuer, to the effect that registration or qualification under the
securities or "blue sky" laws of any state is not required in connection with
such proposed disposition, or (ii) compliance with applicable state securities
or "blue sky" laws has been effected or a valid exemption exists with respect
thereto.  The Issuer will
 
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respond to any such notice from a holder within five (5) Trading Days.  In the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or "blue
sky" laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the
Issuer.  The restrictions on transfer contained in this Section 2(h) shall be in
addition to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant.  Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall use its reasonable best efforts to cause its transfer
agent to electronically transmit the Warrant Stock to the Holder by crediting
the account of the Holder's Prime Broker with DTC through its DWAC system (to
the extent not inconsistent with any provisions of this Warrant or the Purchase
Agreement).  Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
and the Issuer and its transfer agent are participating in DTC through the DWAC
system.
 
(i)    Accredited Investor Status.  In no event may the Holder exercise this
Warrant in whole or in part unless the Holder is then an “accredited investor”
as defined in Regulation D under the Securities Act.
 
3.    Stock Fully Paid; Reservation and Listing of Shares; Covenants.
 
(a)    Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the
Issuer.  The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock issuable upon
exercise of this Warrant.
 
(b)    Reservation.  If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so
listed.  The Issuer will also so list on each securities exchange or market, and
will maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.
 
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(c)    Covenants.  The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment.  Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the Holders of
the Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
 
(d)    Loss, Theft, Destruction of Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
 
4.    Adjustment of Warrant Price and Number of Shares Issuable Upon
Exercise.  The Warrant Price and the Warrant Share Number shall be subject to
adjustment from time to time as set forth in this Section 4.  The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
 
(a)    Recapitalization, Reorganization, Reclassification, Consolidation, Merger
or Sale.
 
(i)    In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate or merge with or into
any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made to the
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the
consummation of such Triggering Event, in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such Triggering Event, the Securities to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto.  Immediately upon the occurrence of a
Triggering Event, the Issuer shall notify the Holder in writing of such
Triggering Event and
 
6

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provide the calculations in determining the number of shares of Warrant Stock
issuable upon exercise of the new warrant and the adjusted Warrant Price.  Upon
the Holder’s request, the continuing or surviving corporation as a result of
such Triggering Event shall issue to the Holder a new warrant of like tenor
evidencing the right to purchase the adjusted number of shares of Warrant Stock
and the adjusted Warrant Price pursuant to the terms and provisions of this
Section 4(a)(i).  Notwithstanding the foregoing to the contrary, this Section
4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
Event is a company that has a class of equity securities registered pursuant to
the Securities Exchange Act of 1934, as amended, and its common stock is listed
or quoted on a national securities exchange, national automated quotation system
or the OTC Bulletin Board.  In the event that the surviving entity pursuant to
any such Triggering Event is not a public company that is registered pursuant to
the Securities Exchange Act of 1934, as amended, or its common stock is not
listed or quoted on a national securities exchange, national automated quotation
system or the OTC Bulletin Board, then the Holder shall have the right to demand
that the Issuer pay to the Holder an amount in cash equal to the value of this
Warrant as of the date of the Triggering Event calculated in accordance with the
Black-Scholes formula.
 
(ii)    In the event that the Holder has elected not to exercise this Warrant
prior to the consummation of a Triggering Event, so long as the surviving entity
pursuant to any Triggering Event is a company that has a class of equity
securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and its common stock is listed or quoted on a national securities
exchange, national automated quotation system or the OTC Bulletin Board, the
surviving entity and/or each Person (other than the Issuer) which may be
required to deliver any Securities upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securities as, in
accordance with the foregoing provisions of this subsection (a), such Holder
shall be entitled to receive, and the surviving entity and/or each such Person
shall have similarly delivered to such Holder an opinion of counsel for the
surviving entity and/or each such Person, which counsel shall be reasonably
satisfactory to such Holder, or in the alternative, a written acknowledgement
executed by the President or Chief Financial Officer of the Issuer, stating that
this Warrant shall thereafter continue in full force and effect and the terms
hereof (including, without limitation, all of the provisions of this subsection
(a)) shall be applicable to the Securities which the surviving entity and/or
each such Person may be required to deliver upon any exercise of this Warrant or
the exercise of any rights pursuant hereto.
 
(b)    Subdivisions and Combinations.  If at any time the Issuer shall:
 
(i)    subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(ii)    combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant Price
then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
 
(c)    Other Provisions applicable to Adjustments under this Section.  The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
 
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(i)    When Adjustments to Be Made.  The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment.  Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made(x) as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or (y) on the date of exercise.  For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
 
(ii)    Fractional Interests.  In computing ad-justments under this Section 4,
fractional interests in Common Stock shall be taken into account to the near-est
one one-hundredth (1/100th) of a share.
 
(d)    Form of Warrant after Adjustments.  The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
 
5.    Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.  Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection.  The
firm selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters to
the Issuer and such Holder within thirty (30) days after submission to it of
such dispute.  Such opinion shall be final and binding on the parties
hereto.  The costs and expenses of the initial accounting firm shall be paid
equally by the Issuer and the Holder and, in the case of an objection by the
Issuer, the costs and expenses of the subsequent accounting firm shall be paid
in full by the Issuer.
 
6.    Fractional Shares.  No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall round the number of shares to be issued upon exercise up to the
nearest whole number of shares.
 
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7.    Ownership Cap and Exercise Restriction.  Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of
Common Stock owned by such Holder and its affiliates at such time, the number of
shares of Common Stock which would result in such Holder and its affiliates
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and
outstanding shares of Common Stock; provided, however, that upon a holder of
this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 7 with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7 will be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.  Notwithstanding the foregoing, these exercise restrictions
shall not be applicable to Renaissance Capital Group, Inc.  and its affiliates
(collectively, "Renn"), if Renn so notifies the Issuer (either in writing or by
email) prior to the date of issuance of the securities to which this paragraph
is applicable.
 
8.    Definitions.  For the purposes of this Warrant, the following terms have
the following meanings:
 
“Board" shall mean the Board of Directors of the Issuer.
 
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
 
"Certificate of Designation" means the Certificate of Designation of the
Relative Rights and Preferences of the Series D Convertible Preferred Stock of
the Issuer as in effect on the Original Issue Date, and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Common Stock" means the Common Stock, $0.01 par value per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
 
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
 
"Holders" mean the Persons who shall from time to time own any Warrant.  The
term "Holder" means one of the Holders.
 
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
 
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"Issuer" means BPO Management Services, Inc., a Delaware corporation, and its
successors.
 
"Majority Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the then-outstanding
Warrants.
 
"Original Issue Date" means June 13, 2007.
 
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
 
"Other Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.
 
"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
 
"Per Share Market Value" means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on the OTC Bulletin Board or a
registered national stock exchange on which the Common Stock is then listed, or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not quoted or listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in Pink Sheets, LLC or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the OTC Bulletin Board or Pink Sheets,
LLC (or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the applicable Trading
Days preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the determination
by such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Independent Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.  The determination of fair market value by an
Independent Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors determinative of value, and
shall be final and binding on all parties.  In determining the fair market value
of any shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by federal
or state securities laws, or to the existence or absence of, or any limitations
on, voting rights.
 
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"Purchase Agreement" means the Series D Convertible Preferred Stock Purchase
Agreement dated as of June 13, 2007, among the Issuer and the Purchasers.
 
"Purchasers" means the purchasers of the Series D Convertible Preferred Stock
and the Warrants issued by the Issuer pursuant to the Purchase Agreement.
 
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security.  "Security" means one of the Securities.
 
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
 
"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
 
"Term" has the meaning specified in Section 1 hereof.
 
"Trading Day" means (a) a day on which the Common Stock is quoted on the OTC
Bulletin Board, or (b) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by Pink Sheets, LLC (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
 
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board (or
other governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.
 
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants.
 
"Warrant Price" initially means $1.35, as such price may be adjusted from time
to time in accordance with the adjustments specified in this Warrant, including
Section 4 hereto.
 
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
 
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"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
 
9.    Other Notices.  In case at any time:
 
 
(A)
the Issuer shall make any distributions to the holders of Common Stock; or

 
 
(B)
the Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 
 
(C)
there shall be any reclassification of the Capital Stock of the Issuer; or

 
 
(D)
there shall be any capital reorganization by the Issuer; or

 
 
(E)
there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

 
 
(F)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;

 
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take
place.  Such notice also shall specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall
be given at least twenty (20) days prior to the action in question and not less
than ten (10) days prior to the record date or the date on which the Issuer's
transfer books are closed in respect thereto.  This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
 
10.   Amendment and Waiver.  Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 10 without the consent of the Holder of this Warrant.  No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of this Warrant unless the same consideration is
also offered to all holders of the Warrants.
 
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11.   Governing Law; Jurisdiction.  This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted.  The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue.  The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New
York.  The Issuer and the Holder consent to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 12 shall affect or limit any right to serve
process in any other manner permitted by law.  The Issuer and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to this Warrant or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.  The
parties hereby waive all rights to a trial by jury.
 
12.   Notices.  Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or delivery by telecopy, e-mail or facsimile at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.  The addresses for such communications
shall be:
 
If to the Issuer:
BPO Management Services, Inc.
1290 N.  Hancock, Ste 200
Anaheim, CA 92807
Attention: Chief Executive Officer
Tel.  No.: (714) 974-2670
Fax No.: (714) 974-4771
E-mail: patrick.dolan@bpoms.com

with copies (which copies shall not constitute notice) to:

Bryan Cave LLP
3161 Michelson Drive, Suite 1500
Irvine, CA 92612
Attention: Randolf W.  Katz, Esq.
Tel.  No.: (949) 223-7103
Fax No.: (949) 223-7100
E-mail: rwkatz@bryancavellp.com

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and
Cornman & Swartz
19800 MacArthur Blvd., Suite 820
Irvine, CA 92612
Attention: Jack T.  Cornman, Esq.
Tel.  No.: (949) 224-1500
Fax No.: (949) 224-1505

If to any Holder: At the address of such Holder set forth on Exhibit A to the
Purchase Agreement or as specified in writing by such Holder with copies to:
 
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 
13.    Warrant Agent.  The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
 
14.    Remedies.  The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
 
15.    Successors and Assigns.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
 
16.    Modification and Severability.  If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.  If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
 
17.    Headings.  The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
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IN WITNESS WHEREOF, the Issuer has executed this Amended and Restated Series A
Warrant as of the day and year first above written.
 

 

 
BPO MANAGEMENT SERVICES, INC.

By:      ____________________________
Name:
Title: 

 
 

 
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EXERCISE FORM
SERIES C WARRANT

BPO MANAGEMENT SERVICES, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of BPO
Management Services, Inc.  covered by the within Warrant.
 
Dated: _________________

 

 
Signature   ______________________________________________     
Address     ________________________________________
               ________________________________________

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
 
The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
 
The undersigned intends that payment of the Warrant Price shall be made as
(check one):
 
Cash Exercise_______
 
Cashless Exercise_______
 
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$________ by certified or official bank check (or via wire transfer) to the
Issuer in accordance with the terms of the Warrant.
 
If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is ___________.  The Issuer
shall pay a cash adjustment in respect of the fractional portion of the product
of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of
exercise, which product is ____________.
 
X = Y - (A)(Y)
                  B

Where:
 
The number of shares of Common Stock to be issued to the Holder
__________________(“X”).
 
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The number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised ___________________________ (“Y”).
 
The Warrant Price ______________ (“A”).
 
The Per Share Market Value of one share of Common Stock _______________________
(“B”).
 
ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
 
Dated: _________________

 

 
Signature   ______________________________________________     
Address     ________________________________________
               ________________________________________

 
PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature   ______________________________________________     
Address     ________________________________________
               ________________________________________

 
FOR USE BY THE ISSUER ONLY:

This Warrant No.  W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No.  W-_____ issued for ____ shares of Common Stock in
the name of _______________.
 
 
 
 
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Exhibit D
 
 
 
 
THIS AMENDED AND RESTATED WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN
OPINION OF COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT
AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
AMENDED AND RESTATED SERIES D WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

BPO MANAGEMENT SERVICES, INC.

Expires June 13, 2012
 

No.: W-D-07- __  
Number of Shares: 1,041,667
Date of Issuance: June 13, 2007   

 
FOR VALUE RECEIVED, the undersigned, BPO Management Services, Inc., a Delaware
corporation (together with its successors and assigns, the "Issuer"), hereby
certifies that US Special Opportunities Trust PLC or its registered assigns is
entitled to subscribe for and purchase, during the Term (as hereinafter
defined), up to One Million Forty-One Thousand Six Hundred Sixty-Seven
(1,041,667) shares (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Common Stock of the
Issuer, at an exercise price per share equal to the Warrant Price then in
effect, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth.  Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 9 hereof.
 
1.    Term.  The term of this Warrant shall commence on June 13, 2007 and shall
expire at 6:00 p.m., eastern time, on June 13, 2012 (such period being the
"Term").
 
2.    Method of Exercise; Payment; Issuance of New Warrant; Transfer and
Exchange.
 
(a)    Time of Exercise.  The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term for such number of shares of
Common Stock equal to one hundred percent (100%) of the number of shares of
Common Stock issuable upon conversion of the shares of preferred stock of the
Issuer that have been exercised by the Holder pursuant to the Series J Warrant
granted by the Issuer to the Holder pursuant to the Purchase Agreement.
 
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(b)    Method of Exercise.  The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
"cashless exercise" in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for the resale of the Warrant Stock is not then in effect, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of this
Warrant.
 
(c)    Cashless Exercise.  Notwithstanding any provisions herein to the contrary
and commencing one and a half (1.5) years following the Original Issue Date if
(i) the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is not then in effect by the date such registration statement is
required to be effective pursuant to the Registration Rights Agreement (as
defined in the Purchase Agreement) or not effective at any time during the
Effectiveness Period (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, unless the
registration statement is not effective as a result of the Issuer exercising its
rights under Section 3(n) of the Registration Rights Agreement, in lieu of
exercising this Warrant by payment of cash, the Holder may exercise this Warrant
by a cashless exercise and shall receive the number of shares of Common Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
 
X = Y - (A)(Y)
                                 B
 
 
Where
X =
the number of shares of Common Stock to be issued to the Holder.
           
Y =
 
the number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised. 
           
A = 
the Warrant Price. 
           
B = 
the Per Share Market Value of one share of Common Stock. 

 

(d)    Issuance of Stock Certificates.  In the event of any exercise of this
Warrant in accordance with and subject to the terms and conditions hereof,
certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and delivered to the Holder hereof within a reasonable
time, not exceeding three (3) Trading Days after such exercise (the “Delivery
Date”) or, at the request of the Holder (provided that a registration statement
under the Securities Act providing for the resale of the Warrant Stock is then
in effect), issued and delivered to the Depository Trust Company (“DTC”) account
on the Holder’s behalf via the Deposit Withdrawal Agent Commission System
(“DWAC”) within a reasonable time, not exceeding three (3) Trading Days after
such exercise, and the Holder hereof shall be deemed for all purposes to be the
holder of the shares of Warrant
 
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Stock so purchased as of the date of such exercise.  Notwithstanding the
foregoing to the contrary, the Issuer or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on a holder’s behalf via
DWAC if such exercise is in connection with a sale and the Issuer and its
transfer agent are participating in DTC through the DWAC system.  The Holder
shall deliver this original Warrant, or an indemnification undertaking with
respect to such Warrant in the case of its loss, theft or destruction, at such
time that this Warrant is fully exercised.  With respect to partial exercises of
this Warrant, the Issuer shall keep written records of the number of shares of
Warrant Stock exercised as of each date of exercise.
 
(e)    Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Exercise.  In addition to any other rights available to the Holder, if the
Issuer fails to cause its transfer agent to transmit to the Holder a certificate
or certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Warrant Stock
which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Issuer shall (1) pay in cash to the Holder the amount by which (x) the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of shares of Warrant Stock that the Issuer was required to deliver to the
Holder in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of shares of Warrant Stock for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Issuer timely complied with its exercise and delivery obligations
hereunder.  For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately
preceding sentence the Issuer shall be required to pay the Holder $1,000.  The
Holder shall provide the Issuer written notice indicating the amounts payable to
the Holder in respect of the Buy-In, together with applicable confirmations and
other evidence reasonably requested by the Issuer.  Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Issuer’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
 
(f)    Transferability of Warrant.  Subject to Section 2(h) hereof, this Warrant
may be transferred by a Holder, in whole or in part, without the consent of the
Issuer.  If transferred pursuant to this paragraph, this Warrant may be
transferred on the books of the Issuer by the Holder hereof in person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the form
attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer.  This Warrant is exchangeable at
the principal office of the Issuer for Warrants to purchase the same aggregate
number of shares of Warrant Stock, each new Warrant to represent the right to
purchase such number of shares of Warrant Stock as the Holder hereof shall
designate at the time of such exchange.  All Warrants issued on transfers or
exchanges shall be dated the Original Issue Date and shall be identical with
this Warrant except as to the number of shares of Warrant Stock issuable
pursuant thereto.
 
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(g)    Continuing Rights of Holder.  The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
 
(h)    Compliance with Securities Laws.
 
(i)    The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder's own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.
 
(ii)    Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:
 
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF
COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER
THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
 
(iii)   The Issuer agrees to reissue this Warrant or certificates representing
any of the Warrant Stock, without the legend set forth above if at such time,
prior to making any transfer of any such securities, the Holder shall give
written notice to the Issuer describing the manner and terms of such
transfer.  Such proposed transfer will not be effected until: (a) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that the registration of such securities under the Securities Act
is not required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act and the Holder has represented that the
Warrant Stock has been or will be sold, (iii) the Issuer has received other
evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the Holder provides the Issuer with reasonable assurances that
such security can be sold pursuant to Rule 144 under the Securities Act; and (b)
either (i) the Issuer has received an opinion of counsel reasonably satisfactory
to the Issuer, to the effect that registration or qualification under the
securities or "blue sky" laws of any state is not required in connection with
such proposed disposition, or (ii) compliance with applicable state securities
or "blue sky" laws has been effected or a valid exemption exists with respect
thereto.  The Issuer will
 
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respond to any such notice from a holder within five (5) Trading Days.  In the
case of any proposed transfer under this Section 2(h), the Issuer will use
reasonable efforts to comply with any such applicable state securities or "blue
sky" laws, but shall in no event be required, (x) to qualify to do business in
any state where it is not then qualified, (y) to take any action that would
subject it to tax or to the general service of process in any state where it is
not then subject, or (z) to comply with state securities or “blue sky” laws of
any state for which registration by coordination is unavailable to the
Issuer.  The restrictions on transfer contained in this Section 2(h) shall be in
addition to, and not by way of limitation of, any other restrictions on transfer
contained in any other section of this Warrant.  Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall use its reasonable best efforts to cause its transfer
agent to electronically transmit the Warrant Stock to the Holder by crediting
the account of the Holder's Prime Broker with DTC through its DWAC system (to
the extent not inconsistent with any provisions of this Warrant or the Purchase
Agreement).  Notwithstanding the foregoing to the contrary, the Issuer or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on a holder’s behalf via DWAC if such exercise is in connection with a sale
and the Issuer and its transfer agent are participating in DTC through the DWAC
system.
 
(i)    Accredited Investor Status.  In no event may the Holder exercise this
Warrant in whole or in part unless the Holder is then an “accredited investor”
as defined in Regulation D under the Securities Act.
 
3.    Stock Fully Paid; Reservation and Listing of Shares; Covenants.
 
(a)    Stock Fully Paid.  The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by or through the
Issuer.  The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of issuance upon exercise of this
Warrant a number of shares of Common Stock equal to at least one hundred twenty
percent (120%) of the aggregate number of shares of Common Stock issuable upon
exercise of this Warrant.
 
(b)    Reservation.  If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified.  If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder (provided that such Warrant Stock has
been registered pursuant to a registration statement under the Securities Act
then in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so
listed.  The Issuer will also so list on each securities exchange or market, and
will maintain such listing of, any other securities which the Holder of this
Warrant shall be entitled to receive upon the exercise of this Warrant if at the
time any securities of the same class shall be listed on such securities
exchange or market by the Issuer.
 
(c)    Loss, Theft, Destruction of Warrants.  Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
 
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4.    Adjustment of Warrant Price and Number of Shares Issuable Upon
Exercise.  The Warrant Price and the Warrant Share Number shall be subject to
adjustment from time to time as set forth in this Section 4.  The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 in accordance with the notice provisions set forth in
Section 5.
 
(a)    Recapitalization, Reorganization, Reclassification, Consolidation, Merger
or Sale.
 
(i)    In case the Issuer after the Original Issue Date shall do any of the
following (each, a "Triggering Event"): (a) consolidate or merge with or into
any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any other Person to
consolidate with or merge into the Issuer and the Issuer shall be the continuing
or surviving Person but, in connection with such consolidation or merger, any
Capital Stock of the Issuer shall be changed into or exchanged for Securities of
any other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or (d) effect
a capital reorganization or reclassification of its Capital Stock, then, and in
the case of each such Triggering Event, proper provision shall be made to the
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant shall be entitled
upon the exercise hereof at any time after the consummation of such Triggering
Event, to the extent this Warrant is not exercised prior to such Triggering
Event, to receive at the Warrant Price as adjusted to take into account the
consummation of such Triggering Event, in lieu of the Common Stock issuable upon
such exercise of this Warrant prior to such Triggering Event, the Securities, to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto.  Immediately upon the occurrence of a
Triggering Event, the Issuer shall notify the Holder in writing of such
Triggering Event and provide the calculations in determining the number of
shares of Warrant Stock issuable upon exercise of the new warrant and the
adjusted Warrant Price.  Upon the Holder’s request, the continuing or surviving
corporation as a result of such Triggering Event shall issue to the Holder a new
warrant of like tenor evidencing the right to purchase the adjusted number of
shares of Warrant Stock and the adjusted Warrant Price pursuant to the terms and
provisions of this Section 4(a)(i).  Notwithstanding the foregoing to the
contrary, this Section 4(a)(i) shall only apply if the surviving entity pursuant
to any such Triggering Event is a company that has a class of equity securities
registered pursuant to the Securities Exchange Act of 1934, as amended, and its
common stock is listed or quoted on a national securities exchange, national
automated quotation system or the OTC Bulletin Board.  In the event that the
surviving entity pursuant to any such Triggering Event is not a public company
that is registered pursuant to the Securities Exchange Act of 1934, as amended,
or its common stock is not listed or quoted on a national securities exchange,
national automated quotation system or the OTC Bulletin Board, then the Holder
shall have the right to demand that the Issuer pay to the Holder an amount in
cash equal to the value of this Warrant as of the date of the Triggering Event
calculated in accordance with the Black-Scholes formula.
 
(ii)    In the event that the Holder has elected not to exercise this Warrant
prior to the consummation of a Triggering Event, so long as the surviving entity
pursuant to any Triggering Event is a company that has a class of equity
securities registered pursuant to the Securities Exchange Act of 1934, as
amended, and its common stock is listed or quoted on a national securities
exchange, national automated quotation system or the OTC Bulletin Board, the
surviving entity and/or each Person (other than the Issuer) which may be
required to deliver any Securities, upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such Securitiesas, in
accordance with the foregoing provisions of this subsection (a), such Holder
shall be entitled to receive, and the surviving entity and/or each such Person
shall have similarly delivered
 
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to such Holder an opinion of counsel for the surviving entity and/or each such
Person, which counsel shall be reasonably satisfactory to such Holder, or in the
alternative, a written acknowledgement executed by the President or Chief
Financial Officer of the Issuer, stating that this Warrant shall thereafter
continue in full force and effect and the terms hereof (including, without
limitation, all of the provisions of this subsection (a)) shall be applicable to
the Securities which the surviving entity and/or each such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
 
(b)    Subdivisions and Combinations.  If at any time the Issuer shall:
 
(i)    subdivide its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
 
(ii)    combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, then (1) the number of shares of Common Stock for which
this Warrant is exercisable immediately after the occurrence of any such event
shall be adjusted to equal the number of shares of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant Price
then in effect shall be adjusted to equal (A) the Warrant Price then in effect
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment divided by (B) the number of
shares of Common Stock for which this Warrant is exercisable immediately after
such adjustment.
 
(c)    Other Provisions applicable to Adjustments under this Section.  The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this Section 4:
 
(i)    When Adjustments to Be Made.  The adjustments required by this Section 4
shall be made whenever and as often as any specified event requiring an
adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable that would otherwise be
required may be postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4(b)) up to, but not
beyond the date of exercise if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than one percent (1%) of
the shares of Common Stock for which this Warrant is exercisable immediately
prior to the making of such adjustment.  Any adjustment representing a change of
less than such minimum amount (except as aforesaid) which is postponed shall be
carried forward and made(x) as soon as such adjustment, together with other
adjustments required by this Section 4 and not previously made, would result in
a minimum adjustment or (y) on the date of exercise.  For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
 
(ii)    Fractional Interests.  In computing ad-justments under this Section 4,
fractional interests in Common Stock shall be taken into account to the near-est
one one-hundredth (1/100th) of a share.
 
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(d)    Form of Warrant after Adjustments.  The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of Securities purchasable upon the exercise of this Warrant.
 
5.    Notice of Adjustments.  Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an "adjustment"), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.  Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection.  The
firm selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters to
the Issuer and such Holder within thirty (30) days after submission to it of
such dispute.  Such opinion shall be final and binding on the parties
hereto.  The costs and expenses of the initial accounting firm shall be paid
equally by the Issuer and the Holder and, in the case of an objection by the
Issuer, the costs and expenses of the subsequent accounting firm shall be paid
in full by the Issuer.
 
6.    Fractional Shares.  No fractional shares of Warrant Stock will be issued
in connection with any exercise hereof, but in lieu of such fractional shares,
the Issuer shall round the number of shares to be issued upon exercise up to the
nearest whole number of shares.
 
7.    Ownership Cap and Exercise Restriction.  Notwithstanding anything to the
contrary set forth in this Warrant, at no time may a Holder of this Warrant
exercise this Warrant if the number of shares of Common Stock to be issued
pursuant to such exercise would exceed, when aggregated with all other shares of
Common Stock owned by such Holder and its affiliates at such time, the number of
shares of Common Stock which would result in such Holder and its affiliates
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.99% of the then issued and
outstanding shares of Common Stock; provided, however, that upon a holder of
this Warrant providing the Issuer with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 7 with regard to any or all shares of Common Stock issuable upon
exercise of this Warrant, this Section 7 will be of no force or effect with
regard to all or a portion of the Warrant referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.  Notwithstanding the foregoing, these exercise restrictions
shall not be applicable to Renaissance Capital Group, Inc.  and its affiliates
(collectively, "Renn"), if Renn so notifies the Issuer (either in writing or by
email) prior to the date of issuance of the securities to which this paragraph
is applicable.
 
8.    Definitions.  For the purposes of this Warrant, the following terms have
the following meanings:
 
“Board" shall mean the Board of Directors of the Issuer.
 
"Capital Stock" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.
 
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"Certificate of Designation" means the Certificate of Designation of the
Relative Rights and Preferences of the Series D Convertible Preferred Stock of
the Issuer as in effect on the Original Issue Date, and as hereafter from time
to time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Certificate of Incorporation" means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.
 
"Common Stock" means the Common Stock, $0.01 par value per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.
 
"Governmental Authority" means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.
 
"Holders" mean the Persons who shall from time to time own any Warrant.  The
term "Holder" means one of the Holders.
 
"Independent Appraiser" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.
 
"Issuer" means BPO Management Services, Inc., a Delaware corporation, and its
successors.
 
"Majority Holders" means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the then-outstanding
Warrants.
 
"Original Issue Date" means June 13, 2007.
 
"OTC Bulletin Board" means the over-the-counter electronic bulletin board.
 
"Other Common" means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.
 
“Outstanding Common Stock” means, at any given time, the aggregate amount of
outstanding shares of Common Stock, assuming full exercise, conversion or
exchange (as applicable) of all options, warrants and other Securities which are
convertible into or exercisable or exchangeable for, and any right to subscribe
for, shares of Common Stock that are outstanding at such time.
 
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"Person" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.
 
"Per Share Market Value" means on any particular date (a) the last closing bid
price per share of the Common Stock on such date on the OTC Bulletin Board or a
registered national stock exchange on which the Common Stock is then listed, or
if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date, or (b) if
the Common Stock is not quoted or listed then on the OTC Bulletin Board or any
registered national stock exchange, the last closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the OTC Bulletin
Board or in Pink Sheets, LLC or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the OTC Bulletin Board or Pink Sheets,
LLC (or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the applicable Trading
Days preceding such date of determination, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an Independent Appraiser selected in good faith by the Majority
Holders; provided, however, that the Issuer, after receipt of the determination
by such Independent Appraiser, shall have the right to select an additional
Independent Appraiser, in which case, the fair market value shall be equal to
the average of the determinations by each such Independent Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.  The determination of fair market value by an
Independent Appraiser shall be based upon the fair market value of the Issuer
determined on a going concern basis as between a willing buyer and a willing
seller and taking into account all relevant factors determinative of value, and
shall be final and binding on all parties.  In determining the fair market value
of any shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by federal
or state securities laws, or to the existence or absence of, or any limitations
on, voting rights.
 
"Purchase Agreement" means the Series D Convertible Preferred Stock Purchase
Agreement dated as of June 13, 2007, among the Issuer and the Purchasers.
 
"Purchasers" means the purchasers of the Series D Convertible Preferred Stock
and the Warrants issued by the Issuer pursuant to the Purchase Agreement.
 
"Securities" means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security.  "Security" means one of the Securities.
 
"Securities Act" means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.
 
"Subsidiary" means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.
 
"Term" has the meaning specified in Section 1 hereof.
 
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"Trading Day" means (a) a day on which the Common Stock is quoted on the OTC
Bulletin Board, or (b) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by Pink Sheets, LLC (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a) or (b)
hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
 
"Voting Stock" means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board (or
other governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.
 
"Warrants" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 2(c), 2(d) or 2(e) hereof or of any of such other
Warrants.
 
"Warrant Price" initially means $1.87, as such price may be adjusted from time
to time in accordance with the adjustments specified in this Warrant, including
Section 4 hereto.
 
"Warrant Share Number" means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.
 
"Warrant Stock" means Common Stock issuable upon exercise of any Warrant or
Warrants or otherwise issuable pursuant to any Warrant or Warrants.
 
9.    Other Notices.  In case at any time:
 
 
(A)
the Issuer shall make any distributions to the holders of Common Stock; or

 
 
(B)
the Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 
 
(C)
there shall be any reclassification of the Capital Stock of the Issuer; or

 
 
(D)
there shall be any capital reorganization by the Issuer; or

 
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(E)
there shall be any (i) consolidation or merger involving the Issuer or (ii)
sale, transfer or other disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

 
 
(F)
there shall be a voluntary or involuntary dissolution, liquidation or winding-up
of the Issuer or any partial liquidation of the Issuer or distribution to
holders of Common Stock;

 
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take
place.  Such notice also shall specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall
be given at least twenty (20) days prior to the action in question and not less
than ten (10) days prior to the record date or the date on which the Issuer's
transfer books are closed in respect thereto.  This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
 
10.   Amendment and Waiver.  Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that no such amendment or waiver shall
reduce the Warrant Share Number, increase the Warrant Price, shorten the period
during which this Warrant may be exercised or modify any provision of this
Section 10 without the consent of the Holder of this Warrant.  No consideration
shall be offered or paid to any person to amend or consent to a waiver or
modification of any provision of this Warrant unless the same consideration is
also offered to all holders of the Warrants.
 
11.   Governing Law; Jurisdiction.  This Warrant shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to any of the conflicts of law principles which would result in
the application of the substantive law of another jurisdiction.  This Warrant
shall not be interpreted or construed with any presumption against the party
causing this Warrant to be drafted.  The Issuer and the Holder agree that venue
for any dispute arising under this Warrant will lie exclusively in the state or
federal courts located in New York County, New York, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that New
York is not the proper venue.  The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of New
York.  The Issuer and the Holder consent to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Warrant and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing in this Section 12 shall affect or limit any right to serve
process in any other manner permitted by law.  The Issuer and the Holder hereby
agree that the prevailing party in any suit, action or proceeding arising out of
or relating to this Warrant or the Purchase Agreement, shall be entitled to
reimbursement for reasonable legal fees from the non-prevailing party.  The
parties hereby waive all rights to a trial by jury.
 
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12.   Notices.  Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or delivery by telecopy, e-mail or facsimile at
the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur.  The addresses for such communications
shall be:
 
If to the Issuer:
BPO Management Services, Inc.
1290 N.  Hancock, Ste 200
Anaheim, CA 92807
Attention: Chief Executive Officer
Tel.  No.: (714) 974-2670
Fax No.: (714) 974-4771
E-mail: patrick.dolan@bpoms.com

with copies (which copies shall not constitute notice) to:

Bryan Cave LLP
3161 Michelson Drive, Suite 1500
Irvine, CA 92612
Attention: Randolf W.  Katz, Esq.
Tel.  No.: (949) 223-7103
Fax No.: (949) 223-7100
E-mail: rwkatz@bryancavellp.com

and
Cornman & Swartz
19800 MacArthur Blvd., Suite 820
Irvine, CA 92612
Attention: Jack T.  Cornman, Esq.
Tel.  No.: (949) 224-1500
Fax No.: (949) 224-1505

If to any Holder: At the address of such Holder set forth on Exhibit A to the
Purchase Agreement or as specified in writing by such Holder with copies to:

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Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
 
13.    Warrant Agent.  The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the purpose
of issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of Section 2 hereof, exchanging this Warrant pursuant to
subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
 
14.    Remedies.  The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.
 
15.    Successors and Assigns.  This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.
 
16.    Modification and Severability.  If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency.  If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
 
17.    Headings.  The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
 
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IN WITNESS WHEREOF, the Issuer has executed this Amended and Restated Series A
Warrant as of the day and year first above written.
 

 
BPO MANAGEMENT SERVICES, INC.

By:        __________________________     
Name:
Title: 

 
 
 
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EXERCISE FORM
SERIES D WARRANT

BPO MANAGEMENT SERVICES, INC.

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of BPO
Management Services, Inc.  covered by the within Warrant.
 
Dated: _________________
 

 
Signature       ________________________________________         
Address       ___________________________________
                  ___________________________________

 
Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the date of Exercise: _________________________
 
The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.
 
The undersigned intends that payment of the Warrant Price shall be made as
(check one):
 
Cash Exercise_______
 
Cashless Exercise_______
 
If the Holder has elected a Cash Exercise, the Holder shall pay the sum of
$________ by certified or official bank check (or via wire transfer) to the
Issuer in accordance with the terms of the Warrant.
 
If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is ___________.  The Issuer
shall pay a cash adjustment in respect of the fractional portion of the product
of the calculation set forth below in an amount equal to the product of the
fractional portion of such product and the Per Share Market Value on the date of
exercise, which product is ____________.
 
X = Y - (A)(Y)
                  B

Where:
 
The number of shares of Common Stock to be issued to the Holder
__________________(“X”).
 
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The number of shares of Common Stock purchasable upon exercise of all of the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised ___________________________ (“Y”).
 
The Warrant Price ______________ (“A”).
 
The Per Share Market Value of one share of Common Stock _______________________
(“B”).
 
ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature       ________________________________________         
Address       ___________________________________
                  ___________________________________

 
PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
 
Dated: _________________
 

 
Signature       ________________________________________         
Address       ___________________________________
                  ___________________________________

 
FOR USE BY THE ISSUER ONLY:

This Warrant No.  W-___ canceled (or transferred or exchanged) this _____ day of
___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No.  W-_____ issued for ____ shares of Common Stock in
the name of _______________.
 
 
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