Unassociated Document


     

    Exhibit
      10.18

     

     

    EMPLOYMENT
      AGREEMENT

     

    


    This
      Employment Agreement (“Agreement”) is dated as of July 29, 2005 (the “Effective
      Date”), by and between BPO Management Services, Inc., a Delaware corporation
      (the “Company”), and Patrick Dolan (the “Founder”). 

     

    RECITALS

     

    WHEREAS,
      the Company wishes to secure the ongoing services of the Founder pursuant to
      the
      terms and conditions set forth herein, and therefore the Founder and the Company
      intend hereby to enter into an employment agreement as set forth
      herein;

     

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants set forth
      below, the parties hereby agree as follows:

     

    1. Employment.
      From and after the Effective Date, the Company hereby agrees to employ the
      Founder as Chief Executive Officer of the Company, and the Founder hereby
      accepts such employment, on the terms and conditions set forth
      below.

    


    2. Term.
      The
      Founder’s employment by the Company hereunder shall begin on the Effective Date
      and shall end 2
      1/2 years from the Effective Date (the
      “Employment Period”), but subject to earlier termination upon termination of the
      Founder’s employment. The Employment Period may be extended by mutual agreement
      of the Company and the Founder.

    


    3. Position
      and Duties. During the Employment Period, the Founder shall serve as Chief
      Executive Officer of the Company with such duties, authority and
      responsibilities that are customary for such position and such other related
      duties as requested by the Board of Directors of the Company (“Board”) from time
      to time. The Founder shall report directly to the Board. Unless otherwise
      authorized by the Board, the Founder shall devote substantially all of his
      working time, attention and energies during normal business hours (other than
      absences due to illness or vacation) to the performance of his duties for the
      Company. Notwithstanding the above, the Founder shall be permitted, to (i)
      serve
      on civic or charitable boards or committees, (ii) serve on boards of other
      companies, and the Founder shall be entitled to receive and retain all
      remuneration received by him from the items listed in clauses (i) through (ii)
      of this paragraph.

    


    4. Place
      of
      Performance. During the Employment Period, the locations of employment of the
      Founder shall be in Orange County, California and the Founder shall not be
      required to relocate his employment to any other location.

    


    5. Compensation
      and Related Matters.

    


    
      	 	
              (a)

            	
              Base
                Salary. Commencing on February 1, 2006 and thereafter during the
                Employment Period, the Company shall pay the Founder a base salary
                at the
                rate of not less than $225,000 per year (“Base Salary”). The Base Salary
                shall be paid in approximately equal installments in accordance with
                the
                Company’s customary payroll practices. The Base Salary and the Annual
                Bonus as described below shall be subject to annual review by the
                Board
                and may be increased in the Board’s discretion. If the Base Salary is
                increased by the Board, such increased Base Salary shall then constitute
                the Base Salary for all purposes under this
                Agreement.

            


    

    
    

     

    
      
         

      

      
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              (b)

            	
              Annual
                Bonus. For each full fiscal year of the Company that begins and ends
                during the Employment Period, and for the portion of the fiscal year
                of
                the Company that begins in 2008 (each a “Partial Year”), the Founder shall
                be eligible to earn an annual cash bonus (the “Annual Bonus”) in such
                amount as shall be determined by the Board of Directors based on
                the
                achievement of Company and individual performance goals as established
                by
                the Board for each such fiscal year (or Partial Year), with such
                Annual
                Bonus being prorated for any Partial Year; provided, however, that
                with
                respect to the first Partial Year ending on December 31, 2005, such
                bonus,
                if any , shall not be paid until on or after February 1, 2006. The
                Board
                shall establish objective criteria to be used to determine the extent
                to
                which performance goals have been satisfied.


            


    

    
      	 	
              (c)

            	
              Business,
                Travel and Entertainment Expenses. The Company shall promptly reimburse
                the Founder for all business, travel and entertainment expenses incurred
                prior to, on or after the Effective Date hereof including expenses
                incurred prior to the formation of the Company, with respect to the
                business or prospective business of the Company, and including expenses
                incurred in connection with the formation of the Company and the
                acquisition of Adapsys Document Management, Inc., a corporation
                incorporated under the laws of Canada, and ADAPSYS
                TRANSACTION PROCESSING INC.,
                a
                corporation incorporated under the laws of Canada (expenses relating
                to
                the formation of the Company and the acquisition of such companies,
                collectively, the “Acquisition
                Expenses”),
                and except for the Acquisition Expenses, subject to the Company’s expense
                reimbursement policies. 

            


    

    
      	 	
              (f)

            	
              Vacation.
                During the Employment Period, the Founder shall be entitled to
                six
                weeks
                of vacation per year. Vacation not taken during the applicable fiscal
                year
                (but not in excess of four
                weeks) shall be carried over to the next following fiscal
                year.

            


    

    
      	 	
              (g)

            	
              Welfare,
                Pension and Incentive Benefit Plans. During the Employment Period,
                the
                Founder (and his eligible spouse and dependents) shall be entitled
                to
                participate in all welfare benefit plans and programs maintained
                by the
                Company from time to time for the benefit of its employees, including,
                without limitation, all medical, hospitalization, dental, disability,
                accidental death and dismemberment, travel accident and life insurance
                plans, programs and arrangements. In addition, during the Employment
                Period, the Founder shall be eligible to participate in all pension,
                retirement, savings and other employee benefit plans and programs
                maintained from time to time by the Company for the benefit if its
                employees.

            


    

    
      	 	
              (h)

            	
              Telephone
                and Internet Access; Car Allowance. During the Employment Period,
                the
                Company shall pay or promptly reimburse the Founder for telephone,
                cell
                phone, computer usage and internet access at his home for business
                use.
                During the Employment Period, the Company shall pay Founder a monthly
                car
                allowance of $750.00 per month.

            


    

    
      	 	
              (i)

            	
              Equity
                Awards. The Board shall in its sole discretion, and with approval
                of the
                Compensation Committee, if any, that is formed by the Board, and
                without
                approval of the “ADM Parties” as defined in the that certain Rights
                Agreement dated July 29, 2005 and entered into among the Company,
                Founder,
                James Cortens, Brian Meyer, Donald West, Ray Belisle and certain
                other
                parties related to the preceding as provided for in such Rights Agreement
                (together with all amendments thereto, the “Rights
                Agreement”)
                or any other persons or entities, may make an annual grant of stock
                options to Founder. In addition to the options that may be granted
                as
                provided for in the preceding sentence, the Founder is hereby granted
                a
                stock option to purchase 750,000 shares of common stock of the Company
                at
                an exercise price of two and one half cents ($0.025) per share and
                subject
                to the following: (i) vesting at 25% per each 12 month fiscal period
                commencing on the Effective Date; (ii) full 100% vesting upon the
                earlier
                of a Change of Control Event as defined below, or 48 months from
                the
                Effective Date, or termination of Founder’s employment by the Company
                without cause by the Company; and (iii) such other terms as provided
                for
                in that certain Grant
                of Stock Option attached hereto.
                

            


    

     

    
      
         

      

      
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    6. Termination.
      The Founder’s employment hereunder may be terminated during the Employment
      Period under the following circumstances:

    
      	 	
              (a)

            	
              Death.
                The Founder’s employment hereunder shall terminate upon his
                death.

            


    

    
      	 	
              (b)

            	
              Disability.
                If, as a result of the Founder’s incapacity due to physical or mental
                illness as determined by a physician selected by the Founder, and
                reasonably acceptable to the Company, (i) the Founder shall have
                been
                substantially unable to perform his duties hereunder for 12 consecutive
                months, or for an aggregate of 270 days during any period of twelve
                consecutive months and (ii) within thirty days after written Notice
                of
                Termination is given to the Founder after such 12 month or 270 aggregate
                day period, the Founder shall not have returned to the substantial
                performance of his duties on a full-time basis, the Company shall
                have the
                right to terminate the Founder’s employment hereunder for
                “Disability.”

            


    

    
      	 	
              (c)

            	
              Cause.
                The Company shall have the right to terminate the Founder’s employment for
                “Cause.” For purposes of this Agreement, the Company shall have “Cause” to
                terminate the Founder’s employment only upon the
                Founder’s:

            


    

    (i) willful
      gross misconduct or conviction of a felony after the Effective Date that, in
      either case, results in material and demonstrable damage to the business or
      reputation of the Company; or

    (ii) willful
      and continued failure to perform his duties hereunder within twenty business
      days after the Company delivers to his a written demand for performance that
      specifically identifies the actions to be performed.

    


    For
      purposes of this Section 6 (c), no act or failure to act by the Founder shall
      be
      considered “willful” if such act is done by the Founder in the good faith belief
      that such act is or was to be beneficial to the Company or one or more of its
      businesses, or such failure to act is due to the Founder’s good faith belief
      that such action would be materially harmful to the Company or one of its
      affiliates or subsidiaries’ businesses. Cause shall not exist unless and until
      the Company has delivered to the Founder a copy of a resolution duly adopted
      by
      a majority of the Board (excluding the Founder for purposes of determining
      such
      majority) at a meeting of the Board called and held for such purpose after
      reasonable (but in no event less than thirty days’) notice to the Founder and an
      opportunity for the Founder, together with his counsel, to be heard before
      the
      Board, finding that in the good faith opinion of the Board that “Cause” exists,
      and specifying the particulars thereof in detail. This Section 6 (c) shall
      not
      prevent the Founder from challenging in any court of competent jurisdiction
      the
      Board’s determination that Cause exists or that the Founder has failed to cure
      any act (or failure to act) that purportedly formed the basis for the Board’s
      determination.

    
      	 	
              (d)

            	
              Without
                Cause. The Company shall have the right to terminate the Founder’s
                employment hereunder without Cause by providing the Founder with
                a Notice
                of Termination.

            


    

    (e)
      Good
      Reason. The Founder may terminate his employment for “Good Reason” after giving
      the Company detailed written notice thereof, if the Company shall have failed
      to
      cure the event or circumstance constituting “Good Reason” within ten business
      days after receiving such notice and provided such event or circumstance is
      capable of cure. Good Reason shall mean the occurrence of any of the
      following:

    (i) the
      assignment to the Founder of duties inconsistent with this Agreement or a change
      in his titles or authority;

    (ii) any
      failure by the Company to comply with Section 5 hereof in any material
      way;

     

    
      
         

      

      
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    (iii) the
      requirement of the Founder to relocate to locations other than those provided
      in
      Section 4 hereof;

    (iv) the
      failure of the Company to comply with and satisfy Section 12(a) of this
      Agreement; or

    (v) any
      material breach of this Agreement by the Company; or

    (vi) the
      acquisition of the Company by another entity by means of any transaction or
      series of related transactions (including, without limitation, any stock
      acquisition, reorganization, merger or consolidation) other than a transaction
      or series of transactions in which the holders of the voting securities of
      the
      Company outstanding immediately prior to such transaction continue to retain
      (either by such voting securities remaining outstanding or by such voting
      securities being converted into voting securities of the surviving entity),
      as a
      result of shares in the Company held by such holders prior to such transactions,
      at least fifty percent (50%) of the total voting power represented by the voting
      securities of the Company or such surviving entity outstanding immediately
      after
      such transaction or series of transactions, or sale of 80% or more of the assets
      of the Company (any of preceding, a “Change
      of Control Event”).

    


    The
      Founder’s right to terminate his employment hereunder for Good Reason shall not
      be affected by his incapacity due to physical or mental illness. The Founder’s
      continued employment shall not constitute consent to, or a waiver of rights
      with
      respect to, any act or failure to act constituting Good Reason
      hereunder.

    


    7. Termination
      Procedure.

    


    
      	 	
              (a)

            	
              Notice
                of Termination. Any termination of the Founder’s employment by the Company
                or by the Founder during the Employment Period (other than pursuant
                to
                Section 6(a)) shall be communicated by written Notice of Termination
                to
                the other party. For purposes of this Agreement, a “Notice of Termination”
                shall mean a notice indicating the specific termination provision
                in this
                Agreement relied upon and setting forth in reasonable detail the
                facts and
                circumstances claimed to provide a basis for termination of the Founder’s
                employment under that provision.

            


    

    
      	 	
              (b)

            	
              Date
                of Termination. “Date of Termination” shall
                mean

            


    

    (i) if
      the
      Founder’s employment is terminated by his death, the date of his death,


    (ii)
      if
      the Founder’s employment is terminated pursuant to Section 6(b), thirty (30)
      days after the date of receipt of the Notice of Termination (provided that
      the
      Founder does not return to the substantial performance of his duties on a
      full-time basis during such thirty (30) day period), and 

    (iii)
      if
      the Founder’s employment is terminated for any other reason, the date on which a
      Notice of Termination is given or any later date (within thirty (30) days after
      the giving of such notice) set forth in such Notice of Termination.

    


    8. Compensation
      upon Termination or During Disability. In the event the Founder is disabled
      or
      his employment terminates during the Employment Period, the Company shall
      provide the Founder with the payments and benefits set forth below. The Founder
      acknowledges and agrees that the payments set forth in this Section 8 constitute
      liquidated damages for termination of his employment during the Employment
      Period

     

    
      
         

      

      
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              (a)

            	
              Termination
                by Company or by Founder for Good Reason. If a Change of Control
                Event
                occurs, or if the Founder’s employment is terminated by the Company
                without Cause (other than Disability) or by the Founder for Good
                Reason:

            


    

    (i) the
      Company shall pay to the Founder, on or before the Date of Termination, a lump
      sum payment equal to the sum of (A) all accrued and unpaid Base Salary and
      accrued unpaid vacation pay through the Date of Termination, (B) provided no
      Change of Control Event has occurred, Base Salary for the remainder of the
      Employment Period; and (c) provided no Change of Control Event has occurred,
      two
      times the highest Annual Bonus paid with respect to any fiscal year beginning
      during the Employment Period, and if no Annual Bonus has been paid, then two
      times the minimum Annual Bonus; 

    (ii) the
      Company shall continue to provide the Founder and his eligible spouse and
      dependents for a period equal to the remainder of the Employment Period, the
      medical, hospitalization, dental and life insurance programs provided for in
      Section 5(g), as if he had remained employed; provided, that if the Founder,
      his
      spouse or his eligible dependents cannot continue to participate in the Company
      programs providing such benefits, the Company shall arrange to provide the
      Founder and his spouse and dependents with the economic equivalent of the
      benefits they otherwise would have been entitled to receive under such plans
      and
      programs;

    (iii) the
      Company shall, consistent with past practice, reimburse the Founder pursuant
      to
      Section 5(e) for business expenses incurred but not paid prior to such
      termination of employment;

    (iv)
      the
      Founder’s unvested stock options previously granted to him shall all become
      immediately 100% vested; and

    (v) the
      Founder shall be entitled to any other rights, compensation and/or benefits
      as
      may be due to the Founder in accordance with the terms and provisions of any
      agreements, plans or programs of the Company.

    The
      payments and benefits provided for as subclause (A) of clause (i) above and
      in
      clause (iii) above are hereinafter referred to as the “Accrued
      Obligations.”

     

    
      	 	
              (b)

            	
              Cause
                or by Founder without Good Reason. If the Founder’s employment is
                terminated by the Company for Cause or by the Founder other than
                for Good
                Reason, then the Company shall provide the Founder with his Accrued
                Obligations and shall have no further obligation to the Founder hereunder
                except for the benefits provided under any stock option grants and
                any
                other agreements, plans or programs of the
                Company.

            


    

    
      	 	
              (c)

            	
              Disability.
                During any period that the Founder fails to perform his duties hereunder
                as a result of incapacity due to physical or mental illness (“Disability
                Period”), the Founder shall continue to receive his full Base Salary set
                forth in Section 5(a) until his employment is terminated pursuant
                to
                Section 6(b). In the event the Founder’s employment is terminated for
                Disability pursuant to Section 6(b), the Company shall have no further
                obligations to the Founder hereunder except to the extent of disability
                benefits or other employee benefit plans and stock option grants
                otherwise
                available to Founder.

            


    

    
      	 	
              (d)

            	
              Death.
                If the Founder’s employment is terminated by his death, the Company shall
                have no further obligations hereunder except for any benefits such
                as life
                insurance and any other benefits otherwise available to Founder or
                his
                family under insurance, stock option grants or other employee benefit
                plans..

            


    

    
      	 	
              (e)

            	
              Offset.
                Amounts owed to the Founder under this Agreement shall not be offset
                by
                any claims the Company may have against the Founder, and the Company’s
                obligation to make the payments provided for in this Agreement, and
                otherwise to perform its obligations hereunder, shall not be affected
                by
                any other circumstances, including, without limitation, any counterclaim,
                recoupment, defense or other right which the Company may have against
                the
                Founder or others.

            


    

     

    
      
         

      

      
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    (f)
      Stock
      Options. Founder’s rights under any stock option grants issued to Founder shall
      not be reduced or adversely affected by any term in this Agreement and such
      rights to the extent as expressly provided for under any stock option grants
      issued by the Company shall survive Founder’s termination of employment for any
      reason.

    


    9. Confidential
      Information.

     

    
      	 	
              (a)

            	
              Confidential
                Information. Except as may be required or appropriate in connection
                with
                his carrying out his duties under this Agreement, the Founder shall
                not,
                without the prior written consent of the Company or as may otherwise
                be
                required by law or any legal process, or as is necessary in connection
                with any adversarial proceeding against the Company (in which case
                the
                Founder shall cooperate with the Company in obtaining a protective
                order
                at the Company’s expense against disclosure by a court of competent
                jurisdiction), communicate, to anyone other than the Company and
                those
                designated by the Company or on behalf of the Company in the furtherance
                of its business or to perform his duties hereunder, any trade secrets,
                confidential information, knowledge or data relating to the Company,
                its
                affiliates or any businesses or investments of the Company or its
                affiliates, obtained by the Founder during the Founder’s employment by the
                Company that is not generally available public knowledge (other than
                by
                acts by the Founder in violation of this
                Agreement.)

            


    

    
      	 	
              (b)

            	
              Injunctive
                Relief. In the event of a breach or threatened breach of this Section
                9,
                the Founder agrees that the Company shall be entitled to injunctive
                relief
                in a court of appropriate jurisdiction to remedy any such breach
                or
                threatened breach, the Founder acknowledging that damages would be
                inadequate and insufficient.

            


    

    


    10. Indemnification.

    


    
      	 	
              (a)

            	
              General.
                The Company agrees that if the Founder is made a party or is threatened
                to
                be made a party to any action, suit or proceeding, whether civil,
                criminal, administrative or investigative (a “Proceeding”), by reason of
                the fact that the Founder is or was a trustee, director or officer
                of the
                Company or any of their affiliates or subsidiaries, or any predecessors
                of
                such affiliates or subsidiaries, or any of their affiliates or
                subsidiaries as a trustee, director, officer, member, employee or
                agent of
                another corporation or a partnership, joint venture, limited liability
                company, trust or other enterprise, including, without limitation,
                service
                with respect to employee benefit plans, whether or not the basis
                of such
                Proceeding is alleged action in an official capacity as a trustee,
                director, officer, member, employee or agent while serving as a trustee,
                director, officer, member, employee or agent, the Founder shall be
                indemnified and held harmless by the Company to the fullest extent
                authorized by Delaware law, as the same exists or may hereafter be
                amended, against all Expenses (as defined below) incurred or suffered
                by
                the Founder in connection therewith, and such indemnification shall
                continue as to the Founder even if the Founder has ceased to be an
                officer, director, trustee or agent, or is no longer employed by
                the
                Company and shall inure to the benefit of his heirs, executors and
                administrators. 

            


    

    
      	 	
              (b)

            	
              Expenses.
                As used in this Agreement, the term “Expenses” shall include, without
                limitation, damages, losses, judgments, liabilities, fines, penalties,
                excise taxes, settlements, and costs, attorneys’ fees, accountants’ fees,
                and disbursements and costs of attachment or similar bonds,
                investigations, and any expenses of establishing a right to
                indemnification under this
                Agreement.

            


    

    
      	 	
              (c)

            	
              Enforcement.
                If a claim or request under this Section 10 is not paid by the Company
                or
                on its behalf, within sixty (60) days after a written claim or request
                has
                been received by the Company, the Founder may at any time thereafter
                bring
                suit against the Company to recover the unpaid amount of the claim
                or
                request and if successful in whole or in part, the Founder shall
                be
                entitled to be paid also the expenses of prosecuting such suit. All
                obligations for indemnification hereunder shall be subject to, and
                paid in
                accordance with, applicable Delaware
                law.

            


    

    
    

     

    
      
         

      

      
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              (d)

            	
              Partial
                Indemnification. If the Founder is entitled under any provision of
                this
                Agreement to indemnification by the Company for some or a portion
                of any
                Expenses, but not, however, for the total amount thereof, the Company
                shall nevertheless indemnify the Founder for the portion of such
                Expenses
                to which the Founder is entitled.

            


    

    
      	 	
              (e)

            	
              Advance
                of Expenses. Expenses incurred by the Founder in connection with
                any
                Proceeding shall be paid by the Company in advance upon request of
                the
                Founder that the Company pay such Expenses, but only in the event
                that the
                Founder shall have delivered in writing to the Company (i) an undertaking
                to reimburse the Company for Expenses with respect to which the Founder
                is
                not entitled to indemnification and (ii) a statement of his good
                faith
                belief that the standard of conduct necessary for indemnification
                by the
                Company has been met.

            


    

    
      	 	
              (f)

            	
              Notice
                of Claim. The Founder shall give to the Company notice of any claim
                made
                against him for which indemnification will or could be sought under
                this
                Agreement. In addition, the Founder shall give the Company such
                information and cooperation as it may reasonably require and as shall
                be
                within the Founder’s power and at such times and places as are convenient
                for the Founder.

            


    

    
      	 	
              (g)

            	
              Defense
                of Claim. With respect to any Proceeding as to which the Founder
                notifies
                the Company of the commencement
                thereof:

            


    

    (i) The
      Company will be entitled to participate therein at its own expense;

    (ii) Except
      as
      otherwise provided below, to the extent that it may wish, the Company will
      be
      entitled to assume the defense thereof, with counsel reasonably satisfactory
      to
      the Founder, which in the Company’s sole discretion may be regular counsel to
      the Company and may be counsel to other officers and directors of the Company
      or
      any subsidiary. The Founder also shall have the right to employ his own counsel
      in such action, suit or proceeding if he reasonably concludes that failure
      to do
      so would involve a conflict of interest between the Company and the Founder,
      and
      under such circumstances the fees and expenses of such counsel shall be at
      the
      expense of the Company.

    (iii) The
      Company shall not be liable to indemnify the Founder under this Agreement for
      any amounts paid in settlement of any action or claim effected without its
      written consent. The Company shall not settle any action or claim in any manner
      which would impose any penalty that would not be paid directly or indirectly
      by
      the Company or limitation on the Founder without the Founder’s written consent.
      Neither the Company nor the Founder will unreasonably withhold or delay their
      consent to any proposed settlement.

    
      	 	
              (h)

            	
              Non-Exclusivity.
                The right to indemnification and the payment of expenses incurred
                in
                defending a Proceeding in advance of its final disposition conferred
                in
                this Section 10 shall not be exclusive of any other right which the
                Founder may have or hereafter may acquire under any statute or certificate
                of incorporation or by-laws of the Company or any subsidiary, agreement,
                vote of shareholders or disinterested directors or trustees or
                otherwise.

            


    

    11. Legal
      Fees and Expenses. If any contest or dispute shall arise between the Company
      and
      the Founder regarding any provision of this Agreement, the Company shall
      reimburse the Founder for all legal fees and expenses reasonably incurred by
      the
      Founder in connection with such contest or dispute, but only if the Founder
      prevails to a substantial extent with respect to the Founder’s claims brought
      and pursued in connection with such contest or dispute. Such reimbursement
      shall
      be made as soon as practicable following the resolution of such contest or
      dispute (whether or not appealed) to the extent the Company receives written
      evidence of such fees and expenses. In addition to the foregoing, the Company
      shall reimburse the Founder for all reasonable legal fees and expenses incurred
      in connection with the negotiation and execution of this Agreement.

     

    
      
         

      

      
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    12. Successors;
      Binding Agreement.

    


    
      	 	
              (a)

            	
              Company’s
                Successors. No rights or obligations of the Company under this Agreement
                may be assigned or transferred, except that the Company shall require
                any
                successor (whether direct or indirect, by purchase, merger, consolidation
                or otherwise) to all or substantially all of the business and/or
                assets of
                the Company to expressly assume and agree to perform this Agreement
                in the
                same manner and to the same extent that the Company would be required
                to
                perform it if no such succession had taken place. As used in this
                Agreement, “Company” shall include any successor to its business and/or
                assets (by merger, purchase or otherwise) which executes and delivers
                the
                agreement provided for in this Section 12 or which otherwise becomes
                bound
                by all the terms and provisions of this Agreement by operation of
                law.

            


    

    
      	 	
              (b)

            	
              Founder’s
                Successors. No rights or obligations of the Founder under this Agreement
                may be assigned or transferred by the Founder other than his rights
                to
                payments or benefits hereunder, which may be transferred only by
                will or
                the laws of descent and distribution. Upon the Founder’s death, this
                Agreement and all rights of the Founder hereunder shall inure to
                the
                benefit of and be enforceable by the Founder’s beneficiary or
                beneficiaries, personal or legal representatives, or estate, to the
                extent
                any such person succeeds to the Founder’s interests under this Agreement.
                If the Founder should die following his Date of Termination while
                any
                amounts would still be payable to him hereunder if he had continued
                to
                live, all such amounts unless otherwise provided herein shall be
                paid in
                accordance with the terms of this Agreement to such person or persons
                so
                appointed in writing by the Founder, or otherwise to his legal
                representatives or estate.

            


    

    13. Notice.
      For the purposes of this Agreement, notices, demands and all other
      communications provided for in this Agreement shall be in writing and shall
      be
      deemed to have been duly given when delivered either personally or by United
      States certified or registered mail, return receipt requested, postage prepaid,
      addressed as follows:

    


    If
      to the
      Founder: At his residence address most recently filed with the
      Company.

     

    If
      to the
      Company:

     

    BPO
      Management Services, Inc.

    c/o
      Jack
      T. Cornman, Esq.

    Cornman
      & Swartz

    19800
      MacArthur Blvd., Suite 820

    Irvine,
      CA 92612

    


    


    or
      to
      such other address as any party may have furnished to the others in writing
      in
      accordance herewith, except that notices of change of address shall be effective
      only upon receipt.

     

    14. Miscellaneous.
      No provisions of this Agreement may be amended, modified, or waived unless
      such
      amendment or modification is agreed to in writing signed by the Founder and
      by a
      duly authorized officer of the Company, and such waiver is set forth in writing
      and signed by the party to be charged. No waiver by either party hereto at
      any
      time of any breach by the other party hereto of any condition or provision
      of
      this Agreement to be performed by such other party shall be deemed a waiver
      of
      similar or dissimilar provisions or conditions at the same or at any prior
      or
      subsequent time. No agreements or representations, oral or otherwise, express
      or
      implied, with respect to the subject matter hereof have been made by either
      party which are not set forth expressly in this Agreement. The respective rights
      and obligations of the parties hereunder of this Agreement shall survive the
      Founder’s termination of employment and the termination of this Agreement to the
      extent necessary for the intended preservation of such rights and obligations.
      Except or otherwise provided in Section 10 hereof, the validity, interpretation,
      construction and performance of this Agreement shall be governed by the laws
      of
      the State of California without regard to its conflicts of law
      principles.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

       

    

    15. Validity.
      The invalidity or unenforceability of any provision or provisions of this
      Agreement shall not affect the validity or enforceability of any other provision
      of this Agreement, which shall remain in full force and effect.

    16. Counterparts.
      This Agreement may be executed in one or more counterparts and by facsimile,
      each of which shall be deemed to be an original but all of which together will
      constitute one and the same instrument.

    17. Entire
      Agreement. This Agreement, set forth the entire agreement of the parties hereto
      in respect of the subject matter contained herein and supersede all prior
      agreements, promises, covenants, arrangements, communications, representations
      or warranties, whether oral or written, by any officer, employee or
      representative of any party hereto in respect of the subject matter hereto,
      without limitation, the Rights Agreement. 

    18. Withholding.
      All payments hereunder shall be subject to any required withholding of Federal,
      state and local taxes pursuant to any applicable law or regulation.

    19. Section
      Headings. The section headings in this Employment Agreement are for convenience
      of reference only, and they form no part of this Agreement and shall not affect
      its interpretation.

    


    CONTINUED
      ON NEXT PAGE

     

    
      
         

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
      first above written.

     

    BPO
      Management Services, Inc.

    


    


    By:
      _______________________

    Name:

    Title:
      Chief Executive Officer

    


    By:
      _______________________

    Name:

    Title:
      Secretary

    


    


    Founder:

    


    __________________
      

    Patrick
      Dolan

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    


    THE
      OPTION GRANTED PURSUANT TO THIS NONSTATUTORY STOCK OPTION AGREEMENT

    (THE
      “OPTION”) AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE
      NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR
      OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      FOR
      THE OPTION OR THE SHARES UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSE
      L,
      WHICH IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION
      IS
      NOT REQUIRED. IN
      ADDITION, THE SHARES ISSUABLE UPON THE ERXERCISE HEREOF ARE ALSO SUBJECT TO
      THE
      FOLLOWING, AS SET FORTH IN THAT CERTAIN RIGHTS AGREEMENT DATED JULY 29, 2005,
      AND THAT CERTAIN REGISTRATION RIGHTS AGREEMENT DATED JULY 29, 2005
      (COLLECTIVELY, THE “AGREEMENTS”) BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF
      THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
      COMPANY: (1) A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE
      OF
      A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE ACT; AND (2) SUCH OTHER
      RESTRICTIONS ON TRANSFER AS PROVIDED FOR IN SUCH AGREEMENTS. SUCH LOCK-UP PERIOD
      AND OTHER RESTRICTIONS ON TRANSFER AS PROVIDED FOR IN THE AGREEMENTS ARE BINDING
      ON TRANSFEREES OF SUCH SHARES.

    


     

    BPO
      Management Services, Inc

     

    Stock
      Option Plan

    


    GRANT
      OF STOCK OPTION 

    


    Date
      of
      Grant: _________, 2005

    


    THIS
      GRANT, dated as of the date of grant first stated above (the "Date of Grant"),
      is delivered by BPO
      Management Services, Inc.,
      a
      Delaware corporation ("BPO" or the “Company”) to Patrick Dolan (the "Grantee"),
      who is an employee or officer of BPO or one of its subsidiaries (the Grantee's
      employer is sometimes referred to herein as the "Employer").

    


    WHEREAS,
      the Board of Directors of BPO (the "Board") on July 29, 2005, adopted, with
      subsequent stockholder approval, the BPO
      Management Services, Inc.
      Stock
      Option Plan (the "Plan");

    


    WHEREAS,
      the Plan provides for the granting of stock options by a committee to be
      appointed by the Board (the "Committee) to directors, officers and key employees
      of BPO or any subsidiary of BPO to purchase, or to exercise certain rights
      with
      respect to, shares of the voting Common Stock of BPO, .001 par value (the
      "Stock"), in accordance with the terms and provisions thereof; and

    


    WHEREAS,
      the Committee considers the Grantee to be a person who is eligible for a grant
      of stock options under the Plan, and has determined that it would be in the
      best
      interest of BPO to grant the stock options documented herein.

    


    NOW,
      THEREFORE, the parties hereto, intending to be legally bound hereby, agree
      as
      follows:

    


    1.
      Grant of Option.

    Subject
      to the terms and conditions hereinafter set forth, BPO, with the approval and
      at
      the direction of the Committee, hereby grants to the Grantee, as of the Date
      of
      Grant, an option to purchase up to 750,000 shares of Stock at a price of Two
      and
      One Half cents ($.025) per share, the fair market value (“Option Price”). Such
      option is hereinafter referred to as the "Option" and the shares of stock
      purchasable upon exercise of the Option are hereinafter sometimes referred
      to as
      the "Option Shares." The Option is not intended by the parties hereto to be
      a
      qualified an incentive stock option as such term is defined under section 422
      of
      the Internal Revenue Code of 1986, as amended (“Code”)). 

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    2.
      Installment Exercise.

    Subject
      to such further limitations as are provided herein, the Option shall become
      exercisable in four (4) installments, the Grantee having the right hereunder
      to
      purchase from BPO the following number of Option Shares upon exercise of the
      Option, on and after the following dates, in cumulative fashion:

    


    (a)
      on
      and after the first anniversary of the Date of Grant, up to one-fourth (ignoring
      fractional shares) of the total number of Option Shares;

    


    (b)
      on
      and after the second anniversary of the Date of Grant, up to an additional
      one-fourth (ignoring fractional shares) of the total number of Option Shares;
      and

    


    (c)
      on
      and after the third anniversary of the Date of Grant, up to an additional
      one-fourth (ignoring fractional shares) of the total number of Option Shares;
      and

    


    (d)
      on
      and after the fourth anniversary of the Date of Grant, the remaining Option
      Shares.

    


    3.
      Termination of Option.

    (a)
      The
      Option and all rights hereunder with respect thereto, to the extent such rights
      shall not have been exercised, shall terminate and become null and void after
      the expiration of five years from the Date of Grant (the "Option
      Term").

    (b)
      Upon
      the occurrence of the Grantee's ceasing for any reason to be employed by the
      Employer (such occurrence being a "termination of the Grantee's employment"),
      the Option, to the extent not previously exercised, may be exercised during
      the
      following periods, but only to the extent that the Option was outstanding and
      exercisable on the date of termination: (i) not later than six (6) months from
      the date of termination of the Grantee's employment in the case of a disability
      (within the meaning of Section 22(e) (3) of the Code), (ii) in the case of
      the
      Grantee's death during his employment by the Employer, not later than six (6)
      months from the Grantee's date of death, and (iii) not later than three (3)
      months from the date of termination of the Grantee’s employment other than for
      the reasons described in (i) and (ii), above. In no event, however, shall any
      such period extend beyond the Option Term.

    


    (c)
      In
      the event of the death of the Grantee, the Option may be exercised by the
      Grantee's estate, or by a person who acquires the right to exercise such Stock
      Option by bequest or inheritance or by reason of the death of the Grantee,
      but
      only to the extent that the Option would otherwise have been exercisable by
      the
      Grantee. Any such estate or other person acquiring rights under this Section
      shall be subject to the Grantee’s obligations under the Option and the
      Plan.

    


    (d)
      A
      transfer of the Grantee's employment between BPO and any subsidiary of BPO,
      or
      between any subsidiaries of ONP, shall not be deemed to be a termination of
      the
      Grantee's employment.

    


    (e)
      Notwithstanding any other provisions set forth herein or in the Plan, if the
      Grantee shall (i) commit any act of malfeasance or wrongdoing affecting BPO
      or
      any subsidiary of BPO, (ii) breach any covenant not to compete, or employment
      contract, with BPO or any subsidiary of BPO, or (iii) engage in conduct that
      would warrant the Grantee's discharge for cause (excluding general
      dissatisfaction with the performance of the Grantee's duties, but including
      any
      act of disloyalty or any conduct clearly tending to bring discredit upon BPO
      or
      any subsidiary of BPO), any unexercised portion of the Option shall immediately
      terminate and be void.

    


    4.
      Exercise of Option.

    (a)
      The
      Grantee may exercise the Option with respect to all or any part of the number
      of
      Option Shares then exercisable hereunder by giving the Secretary of BPO written
      notice of intent to exercise. The notice of exercise shall specify the number
      of
      Option Shares as to which the Option is to be exercised and the date of exercise
      thereof, which date shall be at least five (5) days after the giving of such
      notice unless an earlier time shall have been mutually agreed upon.

    


    (b)
      Full
      payment (in U.S. dollars) by the Grantee of the Option Price for the Option
      Shares purchased shall be made on or before the exercise date specified in
      the
      notice of exercise in cash, or, with the prior written consent of the Committee,
      in whole or in part through the surrender of previously acquired shares of
      Stock
      at their fair market value on the exercise date.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    On
      the
      exercise date specified in the Grantee's notice or as soon thereafter as is
      practicable, BPO shall cause to be delivered to the Grantee, a certificate
      or
      certificates for the Option Shares then being purchased (out of theretofore
      unissued Stock or reacquired Stock, as BPO may elect) upon full payment for
      such
      Option Shares. The obligation of BPO to deliver Stock shall, however, be subject
      to the condition that if at any time the Committee shall determine in its
      discretion that the listing, registration or qualification of the Option or
      the
      Option Shares upon any securities exchange or under any state or federal law,
      or
      the consent or approval of any governmental regulatory body, is necessary or
      desirable as a condition of, or in connection with, the Option or the issuance
      or purchase of Stock thereunder, the Option may not be exercised in whole or
      in
      part unless such listing, registration, qualification, consent or approval
      shall
      have been effected or obtained free of any conditions not acceptable to the
      Committee.

    


    (c)
      If
      the Grantee fails to pay for any of the Option Shares specified in such notice
      or fails to accept delivery thereof, the Grantee's right to purchase such Option
      Shares may be terminated by BPO. The date specified in the Grantee's notice
      as
      the date of exercise shall be deemed the date of exercise of the Option,
      provided that payment in full for the Option Shares to be purchased upon such
      exercise shall have been received by such date.


    (d)
      If
      during the Option Term, (i) there is the sale of eighty (80%) or more of the
      assets of the Company, or (ii) any one person, or more than one person acting
      as
      a group (other than the Company or existing shareholders and any revocable
      intervivos trusts created by any of the existing shareholders), acquires, by
      purchase or exchange, ownership of stock of the Company possessing more than
      fifty (50%) percent of the total voting power of the Company, in such event,
      the
      Option, to the extent not previously exercised, shall immediately become fully
      exercisable.

    


    5.
      Adjustment of and Changes in Stock of BPO.

    In
      the
      event of a reorganization, recapitalization, change of shares, stock split,
      spin-off, stock dividend, reclassification, subdivision or combination of
      shares, merger, consolidation, rights offering, or any other change in the
      corporate structure or shares of capital stock of BPO, the Committee shall
      make
      such adjustment as it deems appropriate in the number and kind of shares of
      Stock subject to the Option or in the Option Price; provided, however, that
      no
      such adjustment shall give the Grantee any additional benefits under the
      Option.

    


    6.
      Fair Market Value.

    As
      used
      herein, the "fair market value" of a share of Stock shall be determined by
      the
      Committee.

    


    7.
      Sale of Common Stock to Company

    Pursuant
      to Section 4.18 of the Plan, and in accordance with the terms thereof, if at
      the
      time of Grantee’s termination of employment with the Employer the Common Stock
      of BPO is not publicly traded, BPO shall have the right (but not the obligation)
      to purchase, and the Grantee shall have the obligation to sell to BPO, the
      Common Stock acquired by the Grantee by the exercise of the Option.

    


    8.
      No Rights of Stockholders.

    Neither
      the Grantee nor any personal representative shall be, or shall have any of
      the
      rights and privileges of, a stockholder of BPO with respect to any shares of
      Stock purchasable or issuable upon the exercise of the Option, in whole or
      in
      part, prior to the date of exercise of the Option.

    


    9.
      Non-Transferability of Option.

    During
      the Grantee's lifetime, the Option hereunder shall be exercisable only by the
      Grantee or any guardian or legal representative of the Grantee, and the Option
      shall not be transferable except, in case of the death of the Grantee, by will
      or the laws of descent and distribution, nor shall the Option be subject to
      attachment, execution or other similar process. In the event of (i) any attempt
      by the Grantee to alienate, assign, pledge, hypothecate or otherwise dispose
      of
      the Option, except as provided for herein, or (ii) the levy of any attachment,
      execution or similar process upon the rights or interest hereby conferred,
      BPO
      may terminate the Option by notice to the Grantee and it shall thereupon become
      null and void.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    10.
      Employment Not Affected.

    The
      granting of the Option or its exercise shall not be construed as granting to
      the
      Grantee any right with respect to continuance of employment by the Employer.
      Except as may otherwise be limited by a written agreement between the Employer
      and the Grantee, the right of the Employer to terminate at will the Grantee's
      employment with it at any time (whether by dismissal, discharge, retirement
      or
      otherwise) is specifically reserved by BPO, as the Employer or on behalf of
      the
      Employer (whichever the case may be), and acknowledged by the
      Grantee.

    


    11.
      Amendment of Option.

    The
      Option may be amended by the Board or the Committee at any time (i) if the
      Board
      or the Committee determines, in its sole discretion, that amendment is necessary
      or advisable in the light of any addition to or change in the Internal Revenue
      Code of 1986, as amended, or in the regulations issued thereunder, or any
      federal or state securities law or other law or regulation, which change occurs
      after the Date of Grant and by its terms applies to the Option; or (ii) other
      than in the circumstances described in clause (i), with the consent of the
      Grantee.

    


    12.
      Notice.

    Any
      notice to BPO provided for in this instrument shall be addressed to it in care
      of its Secretary at its executive offices at: c/o Cornman & Swartz,
      attention: Jack Cornman, 19800 MacArthur Blvd., Suite 820, Irvine, California,
      92612, or such other address per written notice by the BPO, and any notice
      to
      the Grantee shall be addressed to the Grantee at the current address shown
      on
      the payroll records of the Employer. Any notice shall be deemed to be duly
      given
      if and when properly addressed and posted by registered or certified mail,
      postage prepaid.

    


    13.
      Incorporation of Plan by Reference; Amendment.

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    


    The
      Option is granted pursuant to the terms of the Plan, the terms of which are
      incorporated herein by reference, and the Option shall in all respects be
      interpreted in accordance with the Plan. The Committee shall interpret and
      construe the Plan and this instrument, and its interpretations and
      determinations shall be conclusive and binding on the parties hereto and any
      other person claiming an interest hereunder, with respect to any issue arising
      hereunder or thereunder. This Option may be amended after written notice to
      Grantee to the extent necessary to comply with United States Internal Revenue
      Code Section 409A and any regulations relating thereto as determined by BPO
      from
      time to time

    


    14.
      Governing Law.

    The
      validity, construction, interpretation and effect of this instrument shall
      exclusively be governed by and determined in accordance with the law of the
      State of Delaware, except to the extent preempted by federal law, which shall
      to
      the extent govern.

    


    


    IN
      WITNESS WHEREOF, BPO has caused its duly authorized officers to execute and
      attest this Grant of Stock Option, and to apply the corporate seal hereto,
      and
      the Grantee has placed his or her signature hereon, effective as of the Date
      of
      Grant.

     

    
      	 	 	 
	 	BPO
              Management
              Services, Inc.
	Attest:	 
	 
 	 
 	 
 
	 	By:  	 
	
              
 Secretary 	
President
	 	 



    
      
        	 	 	 
	 	ACCEPTED
                AND
                AGREED TO;
	 	 
	 
 	 
 	 
 
	 	By:  	 
	 	
Grantee
	 	 


      

      
 

      
        
           

        

        
          15