Document:

EXHIBIT 7

                                OPTION AGREEMENT

          OPTION AGREEMENT (this  "Agreement")  dated as of May 10, 2000 between
DB Capital Investors,  L.P.  ("Optionee"),  a Delaware limited partnership,  and
Zach Lonstein ("Lonstein"), an individual domiciled in the State of New York.

                              W I T N E S S E T H:

          WHEREAS,  Optionee  is  a  purchaser  under  that  certain  Securities
Purchase  Agreement (the "Purchase  Agreement") dated as of April 7, 2000 by and
among Computer Outsourcing Services, Inc. (the "Company") and certain purchasers
set forth on Exhibit A attached thereto; and

          WHEREAS,  Lonstein owns of record and beneficially 1,673,349 shares of
the Common Stock, par value $.01 per share, of the Company ("Common Stock"); and

          WHEREAS,  in order to induce  Optionee to consummate the  transactions
contemplated by the Purchase Agreement, Lonstein has agreed to grant to Optionee
the Option (as hereinafter defined) and the other rights provided herein.

          NOW THEREFORE,  in  consideration  of the foregoing and other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

          1. Option.

          (a) Grant of Option. Lonstein hereby grants to Optionee an irrevocable
option (the  "Option")  to purchase  up to 375,000  shares of Common  Stock (the
"Option  Shares") at a purchase price of $25.00 per share (as adjusted from time
to time pursuant to the next sentence, the "Purchase Price"). If at any time the
outstanding  shares of the Company's  capital stock are changed into a different
number  of  shares  or a  different  class by  reason  of any  reclassification,
recapitalization,  split-up, combination,  exchange of shares or readjustment or
if a stock  dividend  thereon  is  declared  with a  record  date  prior  to the
termination of this  Agreement,  then the number of Option Shares subject to the
Option and the per share  consideration to be paid by Purchaser upon exercise of
the Option shall be appropriately adjusted.

          (b)  Exercise of Option.  The Option may be  exercised  in whole or in
part,  at any time,  or from time to time,  during the period  commencing on the
date hereof and ending on May 10, 2007 (the "Exercise Period");  provided,  that
to the extent that the exercise of the Option  requires  notification to be made
under the Hart-Scott-Rodino  Antitrust Improvements Act of 1976, as amended (the
"HSR Act"),  the Exercise  Period shall be extended  until that day which is the
first to occur of (i) the  thirtieth  (30th) day  following  the  expiration  or
termination  of all  applicable  waiting  periods  under  the HSR Act;  (ii) the
issuance,  on  any  date  after  May  10,  2007,  of  a  final,   non-appealable
determination by a court of competent  jurisdiction  prohibiting the exercise of
the Option;  or (iii) the  determination by Optionee,  on any date after May 10,
2007,  that it will withdraw its Exercise  Notice (as defined below) or withdraw
or abandon any action contesting an unfavorable  determination by the applicable
authority under the HSR Act.

          (c)  Exercise.  Optionee  shall  exercise  the Option by  delivering a
notice (the "Exercise  Notice") to Lonstein  specifying (i) the number of Option
Shares with respect to which it intends to exercise the Option,  and (ii) a date
not less than three business days nor more than ten business days after the date
on  which  the  Exercise  Notice  is  dated,  on  which  the  purchase  and sale
contemplated thereby is to be consummated (the "Option Closing Date"); provided,
that, to the extent  necessary,  any Option Closing Date shall be  automatically
delayed until that date which is three  business days after the  termination  or
expiration  of all  applicable  waiting  periods  under the HSR Act. No Exercise
Notice  shall be  delivered  after May 10,  2007.  On the Option  Closing  Date,
Lonstein  will  deliver to  Optionee,  at the offices of White & Case LLP,  1155
Avenue of the  Americas,  New York,  New York,  a  certificate  or  certificates
representing  the Option  Shares being  purchased.  Optionee  will purchase such
Option  Shares from  Lonstein by  delivering  to Lonstein an amount equal to the
then effective Purchase Price per share of Common Stock multiplied by the number
of Option  Shares to be purchased  on the  relevant  Option  Closing  Date.  The
aggregate  Purchase  Price with respect to the purchased  Option Shares shall be
paid by  certified  or bank  cheque  delivered  in the  amount of the  aggregate
Purchase  Price tendered to Lonstein at the Option  closing;  provided that upon
notice to Optionee  given not less than two  business  days prior to the Closing
Date, Lonstein may require that the aggregate Purchase Price with respect to the
purchased Option Shares be paid by wire transfer of immediately  available funds
to an account or accounts designated by Lonstein at least two business day prior
to the Option Closing Date.

          (d) HSR Filing.  Optionee and Lonstein  agree to file with the Federal
Trade Commission and the Antitrust  Division of the United States  Department of
Justice  all  required  pre-merger  notification  and  report  forms  and  other
documents  and  exhibits  required  to be filed  under the HSR Act to permit the
exercise  of the  Option  and to  cooperate  with each other to obtain the early
termination of all applicable waiting periods.

          2.  Representations  and  Warranties  of  Lonstein.   Lonstein  hereby
represents and warrants to Optionee as follows:

               (a)  Ownership of Shares.  Lonstein is the record and  beneficial
     owner of the Option Shares.  Lonstein has sole power of  disposition,  sole
     power of conversion and sole power to agree to all of the matters set forth
     in this Agreement,  in each case with respect to all Option Shares, with no
     limitations,  qualifications  or  restrictions  on such rights,  subject to
     applicable securities laws and the terms of this Agreement.

               (b) Power;  Binding  Agreement.  Lonstein has the legal capacity,
     power and authority to enter into and perform all of his obligations  under
     this Agreement.  The execution,  delivery and performance of this Agreement
     by Lonstein  will not violate any other  agreement  to which  Lonstein is a
     party including,  without  limitation,  any voting agreement,  stockholders
     agreement or voting trust.  This Agreement  constitutes a valid and binding
     agreement of Lonstein,  enforceable against Lonstein in accordance with its
     terms.  There is no beneficiary or holder of a voting trust  certificate or
     other  interest of any trust of which  Lonstein is trustee whose consent is
     required  for  the  execution  and  delivery  of  this   Agreement  or  the
     consummation by Lonstein of the transactions contemplated hereby.

               (c) No Conflict.  No filing with,  and no permit,  authorization,
     consent or approval  of, any state or federal  public body or  authority is
     necessary  for  the  execution  of  this  Agreement  by  Lonstein  and  the
     consummation by Lonstein of the transactions  contemplated  hereby and none
     of  the  execution  and  delivery  of  this  Agreement  by  Lonstein,   the
     consummation  by  Lonstein  of  the  transactions  contemplated  hereby  or
     compliance by Lonstein with any of the provisions  hereof shall result in a
     violation or breach of, or constitute  (with or without  notice of lapse of
     time or  both)  a  default  (or  give  rise to any  third  party  right  of
     termination, cancellation, material modification or acceleration) under any
     of the  terms,  conditions  or  provisions  of any  note,  bond,  mortgage,
     indenture,  license,  contract,  commitment,  arrangement,   understanding,
     agreement or other  instrument or obligation of any kind to which  Lonstein
     is a party or by which such  order,  writ,  injunction,  decree,  judgment,
     order,  statute,  rule  or  regulation  applicable  to  Lonstein  or any of
     Lonstein's properties or assets.

               (d) No  Finder's  Fees.  Except  as  disclosed  in  the  Purchase
     Agreement, no broker,  investment banker, financial advisor or other person
     is entitled to any broker's, finder's, financial advisor's or other similar
     fee or commission in connection with the transactions  contemplated  hereby
     based upon arrangements made by or on behalf of Lonstein.

          (e)  No   Encumbrances.   The  Option  Shares  and  the   certificates
     representing  such shares are now,  and at all times during the term hereof
     will be, held by Lonstein,  or by a nominee or custodian for the benefit of
     Lonstein, free and clear of all liens, claims, charges, security interests,
     options (other than the Option),  rights,  pledges, rights of first refusal
     or other adverse claims (as defined in the Uniform  Commercial  Code of the
     State   of   New   York)   or   encumbrances   whatsoever    (collectively,
     "Encumbrances"),   other  than  Encumbrances   contained  in  that  certain
     Stockholders'  Agreement  dated of even date herewith  (the  "Stockholders'
     Agreement") by and among the Company,  DB Capital Investors,  L.P., Sandler
     Capital  Partners  V,  L.P.,  Sandler  Internet  Partners,   L.P.,  Sandler
     Co-Investment  Partners,  L.P.,  certain  Management  Stockholders  of  the
     Company and certain Non-Management Stockholders of the Company.

               (f) Reliance by Optionee.  Lonstein  understands and acknowledges
     that  Optionee is entering  into the Purchase  Agreement  in reliance  upon
     Lonstein's execution and delivery of this Agreement.

          3.  Representations of Optionee.  Optionee  represents and warrants to
Lonstein that: (i) Optionee is a limited  partnership  duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization  with full  partnership  power and authority to execute and deliver
this Agreement and to perform its obligations hereunder;  (ii) the execution and
delivery  of this  Agreement  by such  entity and the  performance  by it of its
obligations  hereunder  have been duly  authorized  by all  necessary  corporate
action on the part of such  entity;  and (iii) this  Agreement  constitutes  the
legal,  valid and binding  obligation  of such entity  enforceable  against such
entity in accordance with its terms,  except as such  enforcement may be limited
by bankruptcy,  insolvency and other similar laws  affecting  creditors'  rights
generally or by general principles, of equity.

          4. Covenants of Lonstein.  Lonstein covenants and agrees that Lonstein
shall (a) at all times  during the Exercise  Period hold,  free and clear of all
Encumbrances (other than Encumbrances contained in the Stockholders'  Agreement)
that number of shares necessary to satisfy its obligations  under this Agreement
and (b) upon delivery of the Option Shares, the Option Shares will be subject to
no (i) voting trust or shareholders agreement,  proxy or other voting agreement,
arrangement or understanding or (ii) Encumbrance.

          5.  Further  Assurance  and  Adjustments.  Lonstein  shall,  upon  the
reasonable  request of Optionee,  execute and deliver any  additional  documents
necessary  or  desirable  to  effect  any of the terms  and  provisions  of this
Agreement.  If at any time the Option Shares are changed into a different number
of  shares   or  a   different   class  by   reason  of  any   reclassification,
recapitalization,  split-up, combination,  exchange of shares or readjustment of
the Company's  capital stock or if a stock  dividend  thereon is declared with a
record  date  prior to the  termination  of this  Agreement,  then the number of
Option Shares subject to this Agreement shall be appropriately adjusted.

          6.  Specific  Performance.  The parties  hereto  agree that if for any
reason  Lonstein  failed to perform  any of  Lonstein's  obligations  under this
Agreement,  Optionee  would be  irreparably  damaged and money damages would not
constitute  an  adequate  remedy.  Accordingly,  Optionee  shall be  entitled to
specific  performance and injunctive and other  equitable  relief to enforce the
performance of such obligations by Lonstein. This provision is without prejudice
to any other rights  Optionee  may have against  Lonstein for failure to perform
any of Lonstein's obligations under this Agreement.

          7. Term.  This  Agreement  shall  commence  on the date hereof and the
Option  shall end upon the later to occur of (x) 11:59 p.m.  on May 10,  2007 or
(y) the termination of the Exercise Period.

          8. Binding  Agreement.  All authority  and rights herein  conferred or
agreed to be  conferred by Lonstein  shall  survive the death or  incapacity  of
Lonstein.  This Agreement  shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal  representatives,  successor
and assigns.

          9. Notices. All notices,  requests,  consents and other communications
hereunder shall be in writing and shall be hand delivered,  delivered by courier
with receipt  acknowledged  or mailed first class,  certified mail, with postage
prepaid, as follows:

                  If to Parent or Optionee, to:

                           DB Capital Investors, L.P.
                           c/o DB Capital Partners, Inc.
                           130 Liberty Street
                           25th Floor
                           New York, New York  10006
                           Attention:  Tyler T. Zachem, Managing Director

                  With a copy to:

                           White & Case LLP
                           1155 Avenue of the Americas
                           New York, New York 10036
                           Attention:  S. Ward Atterbury, Esq.

                  If to Lonstein, to:

                           c/o Computer Outsourcing Solutions, Inc.
                           2 Christie Heights Street
                           Leonia, New Jersey  07605

                  With a copy to:

                           Robinson & Cole LLP
                           695 E. Main Street
                           Stamford, Connecticut  06904
                           Attention:  Richard Krantz, Esq.

          10.  Governing Law. This Agreement  shall be governed by and construed
in accordance  with the laws of the State of New York,  without giving effect to
the principles of conflicts of law thereof.

          11. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original  and all of which,  taken  together,  shall
constitute one instrument.

          12.  Severability.  In case any provision in this  Agreement  shall be
held   invalid,   illegal  or   unenforceable,   the   validity,   legality  and
enforceability  of the  remaining  provisions  hereof  will  not  in any  way be
affected  or  impaired  thereby,   unless  the  provisions  held  invalid  shall
substantially impair the benefits of the remaining portions of this Agreement.

          13. Entire Agreement.  This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior  agreement and  understandings,  both written and oral,  between the
parties with respect to the subject matter hereof.

          14.  Amendments,  Waivers,  Etc.  This  Agreement  may not be amended,
changed,  supplemented,  waived or otherwise modified or terminated, except upon
the  execution  and  delivery of a written  agreement  executed by the  relevant
parties.

          15. No Waiver.  The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise  available in respect
hereof at law or in equity,  or to insist  upon  compliance  by any other  party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof shall not constitute a waiver by such party of
its right to exercise any such or other right, power or remedy or to demand such
compliance.

          16.  Descriptive  Headings.  The descriptive  headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.

          IN WITNESS  WHEREOF,  Optionee and Lonstein have caused this Agreement
to be duly executed as of the day and year first written above.

                                  ZACH LONSTEIN

                                  /s/Zach Lonstein
                                  --------------------------

                                  DB CAPITAL INVESTORS, L.P.

                                     By:  DB Capital Partners, L.P., its
                                          General Partner

                                     By:  DB Capital Partners, Inc., its
                                          General Partner

                                     By:   /s/Frank Schiff
                                        ---------------------
                                        Name:  Frank Schiff
                                        Title: Managing DirectorEXHIBIT 8

                     ASSIGNMENT AND ASSUMPTION OF SECURITIES
                     ---------------------------------------

          ASSIGNMENT AND ASSUMPTION OF SECURITIES AGREEMENT, dated as of May 10,
2000, by and between Computer Outsourcing Services, Inc., a Delaware corporation
(the  "Company"),  each  of  the  assignors  party  hereto  (collectively,   the
"Assignors"),  and  each  of  the  assignees  party  hereto  (collectively,  the
"Assignees").  Capitalized  terms used herein,  unless otherwise defined herein,
shall  have the  meanings  assigned  to such  terms in the  Securities  Purchase
Agreement referred to below.

                              W I T N E S S E T H:
                              - - - - - - - - - -

          WHEREAS,  the Company,  DB Capital  Investors,  L.P. and the Assignors
have executed a Securities  Purchase  Agreement,  dated as of April 7, 2000 (the
"Securities Purchase Agreement");

          WHEREAS,  each of the Assignors  desires to assign its interest in the
Securities to the Assignors;

          WHEREAS, the Company desires to permit the assignment of the Assignors
interests in the Securities to the Assignors.

          NOW, THEREFORE,  for good and valuable consideration,  the receipt and
sufficiency of which are hereby acknowledged, the Company, the Assignors and the
Assignees agree as follows:

          1. The  Assignors  by this  instrument  do hereby  absolutely  assign,
convey,  grant,  transfer and deliver unto the Assignees  all of the  Assignors'
right,  title  and  interest  existing  at the  time  of this  Agreement  in the
Securities set forth below and all of Assignors'  rights and  obligations  under
the Securities Purchase Agreement.

                                                 Shares of
                                                  Series A
               Assignor                        Preferred Stock          Warrants
               --------                        ---------------          --------

Sandler Capital Partners IV, L.P.                 48,605.9              781,985
Sandler Capital Partners IV FTE, L.P.             19,853.1              319,402
Sandler Internet Partners, L.P.                    5,245.9               84,398
Sandler Co-Investment Partners, L.P.               4,983.6               80,178
                                                  --------              -------

Total                                             78,688.5            1,265,963
                                                  ========            =========

          2.  Assignees  hereby  assume  and agree to pay or cause to be paid or
otherwise  discharge,  perform and fulfill or cause to be discharged,  performed
and  fulfilled,  as they  become due and payable all  obligations  of  Assignors
arising on or  subsequent  to the Closing Date which arise out of or are related
to the Securities Purchase Agreement.

                                                 Shares of
               Assignee                           Series A
                                               Preferred Stock         Warrants
                                               ---------------         --------

Sandler Capital Partners V, L.P.                  71,606.5          1,152,026.3
Sandler Internet Partners, L.P.                    5,245.9             84,397.5
Sandler Co-Investment Partners, L.P.                1311.5             21,099.4
Price Family Limited Partners                        262.3              4,219.9
Benake, L.P.                                         262.3              4,219.9
                                                  --------          -----------
Total                                             78,688.5          1,265,963
                                                  ========          ===========

          3. By its  execution and delivery  hereof the Company  consents to the
assignments and assumptions  contemplated  hereby and releases Assignors in full
from any obligation or liability of any nature  whatsoever  which  Assignors may
have had under the Securities Purchase Agreement.

          4. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND  CONSTRUED IN ACCORDANCE
WITH,  THE LAWS OF THE  STATE  OF NEW YORK  REGARDLESS  OF THE LAWS  THAT  MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW THEREOF.

          5. This Agreement may be executed in one or more counterparts,  all of
which shall be considered one and the same  agreement.  Each party need not sign
the same counterpart.
<PAGE>
          IN WITNESS WHEREOF,  the Company, the Assignors and the Assignees have
caused this  Agreement to be signed on its behalf by its officer  thereunto duly
authorized as of the date first written above.

                                             COMPUTER OUTSOURCING SERVICES, INC.

                                             By:/s/ Zach Lonstein
                                                --------------------------------
                                                Name:  Zach Lonstein
                                                Title: CEO

ASSIGNORS:

SANDLER CAPITAL PARTNERS IV, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

SANDLER CAPITAL PARTNERS IV FTE, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

SANDLER INTERNET PARTNERS, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

SANDLER CO-INVESTMENT PARTNERS, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

<PAGE>
ASSIGNEES:

SANDLER CAPITAL PARTNERS V, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

SANDLER INTERNET PARTNERS, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

SANDLER CO-INVESTMENT PARTNERS, L.P.

         By:      Sandler Investment Partners, L.P.,
                  General Partner

         By:      Sandler Capital Management,
                  General Partner

         By:      MJDM Corp., a General
                  Partner

By /s/ Ed Grinacoff
  -----------------------------
  Name:  Ed Grinacoff
  Title: Managing Director

PRICE FAMILY LIMITED PARTNERS

By /s/ Michael Price
  ------------------------------
Name:    Michael Price,
         General Partner

BENAKE, L.P.

By /s/ Lynn Forester
  ------------------------------
Name:    Lynn Forester,
         General Partner

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