bpl_sb2a1-ex1045.htm


    Exhibit
      10.45

     

    
      REFORMATION
        AGREEMENT

      


      This
        Reformation Agreement (this “Agreement”) is effective as of June 13,
        2007, by and among BPO Management Services, Inc., a Delaware corporation
        (the
“Company”), and the purchasers listed on the signature pages hereto (the
“Purchasers”).  Each of the Company and the Purchasers is
        individually referred to herein as a “Party” and are, collectively, the
“Parties.”

      


      RECITALS

       

      WHEREAS,
        the Parties entered into that certain Series D Convertible Preferred Stock
        Purchase Agreement dated as of June 13, 2007 (the “Stock Purchase
        Agreement”) and certain other documents required by, or provided for in, the
        Stock Purchase Agreement (together with the Stock Purchase Agreement, the
        “Transaction Documents”);

       

      WHEREAS,
        pursuant to the Transaction Documents, the Purchasers purchased an aggregate
        of
        1,458,333.8 shares of the Company’s Series D Convertible Preferred Stock, Series
        A, B, C, and D Warrants exercisable for the purchase of an aggregate of
        approximately 70.0 million shares of the Company’s common stock, and Series J
        Warrants exercisable for the purchase of an aggregate of 1,458,333.8 shares
        of
        the Company’s Series D-2 Convertible Preferred Stock, for an aggregate purchase
        price of approximately $14 million (the “Investment Funds”);

       

      WHEREAS,
        the agreed-upon use of the proceeds from the Transaction Documents was for
        the
        completion of certain specified acquisitions and such other subsequent
        acquisitions as, under certain circumstances, might be proposed by the Company,
        subject to certain approval provisions in favor of the Purchasers, as well
        as to
        fund the Company’s general working capital requirements;

       

      WHEREAS,
        the Parties’ intention in connection with the transactions contemplated by the
        Transaction Documents (collectively, the “Transaction”) was that
        (a) the Purchasers were purchasing, for their own account for the purpose
        of investment and not with a view to or for sale in connection with
        distribution, equity capital and warrants exercisable for the purchase of
        equity
        securities of the Company, (b) the Company’s obligation to issue its equity
        securities upon conversion of the Series D Convertible Preferred Stock and
        upon
        exercise of the warrants purchased in the Transaction was absolute and
        unconditional, (c) the Company would not treat the Series D Convertible
        Preferred Stock in any way other than as equity capital or the dividends
        paid
        thereon other than as dividends paid on equity capital, and (d) the dividends
        paid on the Series D Convertible Preferred Stock would be eligible for the
        dividends received deduction provided by Section 243(a)(1) of the Internal
        Revenue Code of 1986, as amended, or any successor provision thereto; by
        way of
        illustration (and not limitation), see Sections 2.1(cc), 2.2(d), 3.10 and
        8.1 of
        the Stock Purchase Agreement evidencing such intent;

       

      WHEREAS,
        the Transaction Documents referenced an “Acquisition Failure,” which event could
        occur if the Company were to fail to use at least $10 million of the Investment
        Funds for the completion of certain specified acquisitions that the Purchasers
        approved in the Transaction Documents (two of which were consummated shortly
        after the closing of the Transaction) and such other subsequent acquisitions
        as,
        under certain circumstances, might be proposed by the Company, subject to
        certain approval provisions in favor of the Purchasers; and the Transaction
        Documents provide that upon the occurrence of an Acquisition Failure, the
        Company is to redeem a pro rata portion of the Series D Convertible Preferred
        Stock and the warrants purchased in the Transaction (“Acquisition Failure
        Redemption”);

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS,
        the Parties intended that the Transaction fully close on June 13, 2007, and
        each
        of the Parties confirms that it had no intention of causing or permitting
        an
        Acquisition Failure to occur, which could, thereby, trigger an Acquisition
        Failure Redemption;

       

      WHEREAS,
        contrary to the stated intentions of the Parties and covenants of the Company
        that the Investment Funds were always to be classified as having been paid
        for
        the purchase of equity capital and warrants exercisable for the purchase
        of
        equity securities of the Company, the concept of an Acquisition Failure could
        cause, under United States generally accepted accounting principles, a portion
        of the Investment Funds to be characterized as a mezzanine loan to the Company
        and certain of the warrants to be characterized as derivative liabilities
        and
        treated as debt, rather than as equity capital; and

       

      WHEREAS,
        in light of the apparent internal inconsistency in the Transaction Documents
        between (a) treatment of the Transaction as wholly a purchase of equity capital
        and warrants exercisable for the purchase of equity securities of the Company,
        as intended by the Parties, and (b) treatment of the Transaction as partially
        a
        purchase of equity and partially as a mezzanine loan and related derivative
        instrument debt to the Company, as unintentionally drafted by counsel in
        the
        Transaction immediately prior to closing without the understanding by the
        Parties that the accounting implications of such language were contrary to
        their
        business agreements, the Parties desire to reform the Transaction Documents
        to
        (x) memorialize and confirm their intent, understanding and agreement that
        the
        Transaction was solely a purchase of equity capital and warrants exercisable
        for
        the purchase of equity securities of the Company and (y) remove any
        apparent inconsistency caused by the drafting by counsel to the
        Parties.

       

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

       

      1.  Reformation
        of Transaction Documents.  In order to resolve the apparent
        internal inconsistency in the Transaction Documents, the Parties agree that
        each
        and every appearance of the words “Acquisition Failure,” “Acquisition Failure
        Redemption,” “Acquisition Failure Percentage,” “Acquisition Failure Amount,”
“Acquisition Failure Redemption Amount,” “Acquisition Failure Redemption Price,”
and similar such words or derivations therefrom shall be deleted from the
        Transaction Documents.  By way of clarification (and not of
        limitation), the Parties agree as follows:

      


      a.  Clause
        (a) in its entirety shall be deleted from Section 2.1(ll) of the Stock Purchase
        Agreement;

      b.  Section
        3.11(b) in its entirety shall be deleted from the Stock Purchase
        Agreement;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      c.  Section
        8(h) shall be deemed waived by the Purchasers (on their own behalf and on
        behalf
        of any successor or assign of Purchasers) from both (i) the Certificate of
        Designation of the Relative Rights and Preferences of the Series D Convertible
        Preferred Stock of the Company and (ii) the Certificate of Designation of
        the
        Relative Rights and Preferences of the Series D-2 Convertible Preferred Stock
        of
        the Company.  Each of the Purchasers hereby (x) agrees that it
        shall give written notice of such waiver to any successor or assign of the
        Purchaser and (y) consents to (I) the amendment of each such Certificate
        of
        Designation solely to delete Section 8(h) in its entirety and (II) the filing
        by
        the Company of such amended Certificates of Designation with the Secretary
        of
        State of the State of Delaware.

      d.  Section
        4(j) in its entirety shall be deleted from each and every Series A, B, J,
        C and
        D Warrant issued by the Company to the Purchasers.

      


      2.  General.

      


      a.  Entire
        Agreement.  Except as reformed by this Agreement, the Transaction
        Documents remain unmodified and in full force and effect.  In the
        event of any inconsistency between the provisions of the Transaction Documents
        and the provisions of this Agreement, the provisions of this Agreement shall
        prevail.  The Transaction Documents, as reformed by this Agreement,
        contain the entire understanding among the Parties 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 and among the Parties relating to
        the
        subject matter hereof that are not fully expressed herein.

      


      b.  Amendments
        and Waivers.  The provisions of this Agreement, including the
        provisions of this sentence, may not be amended, modified or supplemented,
        and
        waivers or consents to departures from the provisions hereof may not be given,
        unless the same shall be in writing and signed by the Company and holders
        of at
        least seventy-five percent (75%) of the Series D and Series D-2 Convertible
        Preferred Stock then-outstanding.

      


      c.  Notices.  Notice
        given hereunder shall be given in accordance with Section 9.4 of the Stock
        Purchase Agreement.

      


      d.  Successors
        and Assigns.  This Agreement shall be binding upon and inure to
        the benefit of the Parties and their successors and permitted
        assigns.  The Company may not assign this Agreement or any of its
        rights or obligations hereunder without the prior written consent of each
        Purchaser.  Each Purchaser may assign its rights hereunder in the
        manner and to the Persons (as defined in the Registration Rights Agreement
        among
        the Parties dated as of June 13, 2007) as permitted under the Stock
        Purchase Agreement.

      


      e.  Counterparts.  This
        Agreement may be executed in any number of counterparts, each of which when
        so
        executed shall be deemed to be an original and, all of which taken together,
        shall constitute one and the same Agreement and shall become effective when
        counterparts have been signed by each Party and delivered to the other Parties,
        it being understood that all Parties need not sign the same
        counterpart.  In the event that any signature is delivered by
        facsimile or PDF transmission, such signature shall create a valid binding
        obligation of the Party executing (or on whose behalf such signature is
        executed) the same with the same force and effect as if such facsimile or
        PDF
        signature were the original thereof.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      f.  Governing
        Law; Jurisdiction.  This Agreement 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
        Agreement shall not be interpreted or construed with any presumption against
        the
        Party causing this Agreement to be drafted.  The Company and the
        Purchasers agree that venue for any dispute arising under this Agreement
        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 Company and the Purchasers irrevocably consent to personal
        jurisdiction in the state and federal courts of the state of New
        York.  The Company and the Purchasers consent to process being served
        in any such suit, action or proceeding by delivering a copy thereof to such
        Party at the address in effect for notices to it under this Agreement and
        agrees
        that such service shall constitute good and sufficient service of process
        and
        notice thereof.  Nothing in this Section 2(f) shall affect or limit
        any right to serve process in any other manner permitted by law.  The
        Company and the Purchasers hereby agree that the prevailing party in any
        suit,
        action or proceeding arising out of or relating to this Agreement or the
        Stock
        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.

      


      g.  Severability.  If
        any term, provision, covenant or restriction of this Agreement is held to
        be
        invalid, illegal, void or unenforceable in any respect, the remainder of
        the
        terms, provisions, covenants and restrictions set forth herein shall remain
        in
        full force and effect and shall in no way be affected, impaired or invalidated,
        and the Parties shall use their reasonable efforts to find and employ an
        alternative means to achieve the same or substantially the same result as
        that
        contemplated by such term, provision, covenant or restriction.  It is
        hereby stipulated and declared to be the intention of the
        Parties that they would have executed the remaining terms, provisions, covenants
        and restrictions without including any of such that may be hereafter declared
        invalid, illegal, void or unenforceable.

      


      h.  Headings.  The
        headings herein are for convenience only, do not constitute a part of this
        Agreement and shall not be deemed to limit or affect any of the provisions
        hereof.

      


      i.  Shares
        Held by the Company and its Affiliates.  Whenever the consent or
        approval of holders of a specified percentage of the Series D or Series D-2
        Convertible Preferred Stock is required hereunder, any such class of stock
        held
        by the Company or its affiliates (other than any Purchaser or transferees
        or
        successors or assigns thereof if such Purchaser is deemed to be an affiliate
        solely by reason of its holdings of such securities) shall not be counted
        in
        determining whether such consent or approval was given by the holders of
        such
        required percentage.

      


      


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      IN
        WITNESS WHEREOF, the Parties have
        caused this Reformation Agreement to be duly executed by their respective
        authorized persons as of the date first indicated above.

      


      
        	 	
                BPO
                  MANAGEMENT SERVICES, INC.

              
	 	 
	 	 
	 	
                By: /s/
                  Patrick Dolan 

              
	 	
                
                  

                

                Name:
                  Patrick Dolan

              
	 	
                Title:
                  Chairman & CEO

              
	 	 
	 	
                PURCHASERS:

              
	 	 
	 	
                VISION
                  OPPORTUNITY MASTER FUND, LTD.:

              
	 	 
	 	 
	 	
                By:
                  /s/ Adam Benowitz

              
	 	
                
                  

                

                Name: 
                  Adam Benowitz

              
	 	
                Title: 
                  Director

              
	 	 
	 	 
	 	
                RENAISSANCE
                  US GROWTH INVESTMENT TRUST PLC:

              
	 	 
	 	 
	 	
                By:
                  /s/ Z. Eric Stephens 

              
	 	
                
                  

                

                Name:
                  Z. Eric Stephens

              
	 	
                Title:
                  VP of RENN Capital Group, the

                Company's
                  investment adviser

              
	 	 
	 	 
	 	
                RENAISSANCE
                  CAPITAL GROWTH & INCOME FUND III, INC.:

              
	 	 
	 	 
	 	
                By:
                  /s/ Z. Eric Stephens 

              
	 	
                
                  

                

                Name:
                  Z. Eric Stephens

              
	 	
                Title:
                  VP of RENN Capital Group, the

                Company's
                  investment
                  adviser

              


      

      


      


      [Signature
        Page to Reformation Agreement]

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      
        
          	 	
                  US
                    SPECIAL OPPORTUNITIES TRUST PLC:

                
	 	 
	 	 
	 	
                  By:
                    /s/ Z. Eric Stephens 

                
	 	
                  
                    

                  

                  Name:
                    Z. Eric Stephens

                
	 	
                  Title:
                    VP of RENN Capital Group, the

                  Company's
                    investment adviser

                
	 	 
	 	 
	 	
                  PREMIER
                    RENN US EMERGING GROWTH FUND LTD.:

                
	 	 
	 	 
	 	
                  By:
                    /s/ Z. Eric Stephens 

                
	 	
                  
                    

                  

                  Name:
                    Z. Eric Stephens

                
	 	
                  Title:
                    VP of RENN Capital Group, the

                  Company's
                    investment adviser

                
	 	 
	 	
                  BRIDGEPOINTE
                    MASTER FUND LTD.:

                
	 	 
	 	 
	 	
                  By:
                    /s/ Eric S. Swartz

                
	 	
                  
                    

                  

                  Name:
                    Eric S. Swartz

                
	 	
                  Title:
                    Director

                
	 	 
	 	 
	 	
                  HELLER
                    CAPITAL INVESTMENTS LLC:

                
	 	 
	 	 
	 	
                  By:
                    /s/ Ronald I. Heller 
                    

                  

                
	 	
                  Name:
                    Ronald I. Heller

                
	 	
                  Title:
                    CIO

                


        



      


       

      [Signature
        Page to Reformation Agreement]