Document:

INDEMNITY
      AGREEMENT

     

    This
      Indemnity Agreement (“Agreement”)
      is
      made as of June __, 2007 by and between BPO Management Services, Inc., a
      Delaware corporation (the “Company”),
      and
      __________________ (“Indemnitee”).
      

     

    RECITALS

     

    WHEREAS,
      qualified persons have become more reluctant to serve publicly-held corporations
      as directors or Named Executive Officers (as hereinafter defined) unless they
      are provided with adequate protection through insurance or adequate
      indemnification against inordinate risks of claims and actions against them
      arising out of their service to and activities on behalf of such corporation;
      

     

    WHEREAS,
      the Board of Directors of the Company (the “Board”)
      has
      determined that the increased difficulty in attracting and retaining such
      persons is detrimental to the best interests of the Company’s stockholders and
      that the Company should act to assure such persons that there will be increased
      certainty of such protection in the future; 

     

    WHEREAS,
      it is reasonable, prudent and necessary for the Company to agree contractually
      to indemnify such persons so that they will serve or continue to serve the
      Company free from undue concern that they will not be so indemnified;
      and

     

    WHEREAS,
      the Company desires and intends hereby to indemnify Indemnitee to the fullest
      extent permitted by law.

     

    NOW,
      THEREFORE, in consideration of the premises and the covenants contained herein
      and for other good and valuable consideration, the receipt and adequacy of
      which
      are hereby acknowledged, the Company and Indemnitee do hereby covenant and
      agree
      as follows: 

     

    1. Services
      to the Company.
      Indemnitee will serve or continue to serve, at the will of the Company, as
      a
      director of the Company for so long as Indemnitee is duly elected or until
      Indemnitee tenders his resignation. If Indemnitee is a Named Executive Officer,
      Indemnitee will serve or continue to serve, at the will of the Company, as
      an
      officer of the Company for so long as provided in any employment agreement
      between the Company and Indemnitee, if any, or as provided in the Company’s
      policies. 

     

    2. Indemnity
      of Indemnitee.
      The
      Company hereby agrees to hold harmless and indemnify Indemnitee to the fullest
      extent permitted by applicable law, as such may be amended from time to time.
      In
      furtherance of the foregoing indemnification, and without limiting the
      generality thereof:

     

    (a) Proceedings
      Other Than Proceedings by or in the Right of the Company.
      Indemnitee shall be entitled to the rights of indemnification provided in this
      Section 2(a) if, by reason of his Corporate Status (as hereinafter defined),
      Indemnitee is, or is threatened to be made, a party to any Proceeding (as
      hereinafter defined), other than a Proceeding by or in the right of the Company.
      Pursuant to this Section 2(a), Indemnitee shall be indemnified against
      all

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Expenses
      (as hereinafter defined), judgments, fines, penalties and amounts paid in
      settlement actually and reasonably incurred by Indemnitee or on his behalf
      in
      connection with such Proceeding or any claim, issue or matter therein, if
      Indemnitee acted in good faith and in a manner he reasonably believed to be
      in
      or not opposed to the best interests of the Company and, in the case of a
      criminal Proceeding, had no reasonable cause to believe that his conduct was
      unlawful. 

     

    (b) Proceedings
      by or in the Right of the Company.
      Indemnitee shall be entitled to the rights of indemnification provided in this
      Section 2(b) if, by reason of his Corporate Status, Indemnitee is, or is
      threatened to be made, a party to any Proceeding brought by or in the right
      of
      the Company to procure a judgment in its favor. Pursuant to this
      Section 2(b), Indemnitee shall be indemnified against all Expenses actually
      and reasonably incurred by him or on his behalf in connection with such
      Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
      faith and in a manner he reasonably believed to be in, or not opposed to, the
      best interests of the Company; provided,
      however,
      if
      applicable law so provides, no indemnification for such Expenses shall be made
      in respect of any claim, issue or matter in such Proceeding as to which
      Indemnitee shall have been adjudged to be liable to the Company, unless and
      only
      to the extent that any court in which the Proceeding was brought or the Delaware
      Court (as defined below) shall determine upon application that, despite the
      adjudication of liability but in view of all the circumstances of the case,
      Indemnitee is fairly and reasonably entitled to indemnification for such
      Expenses as the Delaware Court or such other court shall deem proper.

     

    (c) Indemnification
      for Expenses of a Party Who is Wholly or Partly Successful.
      Notwithstanding any other provision of this Agreement, to the extent that
      Indemnitee is, by reason of his Corporate Status, a party to and is successful,
      on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified
      to the maximum extent permitted by law, as such may be amended from time to
      time, against all Expenses actually and reasonably incurred by him or on his
      behalf in connection therewith. If Indemnitee is not wholly successful in such
      Proceeding but is successful, on the merits or otherwise, as to one or more,
      but
      less than all, claims, issues or matters in such Proceeding, the Company shall
      indemnify and hold harmless Indemnitee against all Expenses actually and
      reasonably incurred by him or on his behalf in connection with each successfully
      resolved claim, issue or matter. For purposes of this Section and without
      limitation, the termination of any claim, issue or matter in such a Proceeding
      by dismissal, with or without prejudice, shall be deemed to be a successful
      result as to such claim, issue or matter. 

     

    (d) Indemnification
      for Expenses of a Witness.
      Notwithstanding any other provision of this Agreement, to the extent that
      Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding
      to
      which Indemnitee is not a party, he shall be indemnified against all Expenses
      actually and reasonably incurred by him or on his behalf in connection
      therewith.

     

    3. Additional
      Indemnification.
      In
      addition to, and without regard to any limitations on, the indemnification
      provided for in Section 2 of this Agreement, the Company shall indemnify and
      hold harmless Indemnitee against all Expenses, judgments, fines, penalties
      and
      amounts paid in settlement actually and reasonably incurred by Indemnitee or
      on
      his behalf if, by reason of his Corporate Status, he is, or is threatened to
      be
      made, a party to any Proceeding

    
      
         

      

      
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    (including
      a Proceeding by or in the right of the Company); provided that, prior to any
      payments being made to Indemnitee under this Section, Indemnitee shall deliver
      to the Company an undertaking to repay any Expenses advanced if it shall be
      finally determined (under the procedures, and subject to the presumptions,
      set
      forth in Section 6 hereof) that Indemnitee is not entitled to be indemnified
      against such Expenses or that such indemnification would be unlawful.

     

    4. Exclusions.
      Notwithstanding any provision in this Agreement, the Company shall not be
      obligated under this Agreement to make any indemnity in connection with any
      claim made against Indemnitee: (a) for which payment has actually been received
      by or on behalf of Indemnitee under any insurance policy of the Company or
      other
      indemnity provision of the Company, except with respect to any excess beyond
      the
      amount actually received under any insurance policy of the Company or other
      indemnity provision of the Company; (b) for an accounting of profits made from
      the purchase and sale (or sale and purchase) by Indemnitee of securities of
      the
      Company within the meaning of Section 16(b) of the Exchange Act of 1934, as
      amended, or similar provisions of state statutory law or common law; or (c)
      in
      connection with any Proceeding (or any part of any Proceeding) initiated by
      Indemnitee (other than a Proceeding (or any part of a Proceeding) initiated
      by
      Indemnitee to enforce the provisions of this Agreement), including any
      Proceeding (or any part of any Proceeding) initiated by Indemnitee against
      the
      Company or its directors, officers, employees or other indemnitees, unless
      (i)
      the Board of the Company authorized the Proceeding (or any part of any
      Proceeding) prior to its initiation or (ii) the Company provides the
      indemnification, in its sole discretion, pursuant to the powers vested in the
      Company under applicable law. 

     

    5. Advances
      of Expenses; Defense of Claim.
      

     

    (a) Notwithstanding
      any provision of this Agreement to the contrary, the Company shall advance
      the
      Expenses incurred by or on behalf of Indemnitee in connection with any
      Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days
      after the receipt by the Company of a statement or statements requesting such
      advance or advances from time to time, whether prior to or after final
      disposition of any Proceeding. Such statement or statements shall reasonably
      evidence the Expenses incurred by Indemnitee and shall include or be preceded
      or
      accompanied by an undertaking by or on behalf of Indemnitee to repay any
      Expenses advanced if it shall ultimately be determined that Indemnitee is not
      entitled to be indemnified against such Expenses. This Section 5(a) shall not
      apply to any claim made by Indemnitee for which indemnity is excluded pursuant
      to Section 4. 

     

    (b) The
      Company will be entitled to participate in the Proceeding at its own expense.
      

     

    6. Procedures
      and Presumptions for Determination of Entitlement to
      Indemnification.
      It is
      the intent of this Agreement to secure for Indemnitee rights of indemnity that
      are as favorable as may be permitted under the Delaware General Corporation
      Law
      and public policy of the State of Delaware. Accordingly, the parties agree
      that
      the following procedures and presumptions shall apply in the event of any
      question as to whether Indemnitee is entitled to indemnification under this
      Agreement:

    
      
         

      

      
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    (a) Indemnitee
      agrees to promptly notify the Company in writing within five (5) days after
      being served with any summons, citation, subpoena, complaint, indictment,
      information or other document relating to any Proceeding or matter which may
      be
      subject to indemnification or advancement of Expenses covered hereunder. Failure
      to promptly notify the Company shall not terminate the Company’s obligation to
      Indemnitee with respect to such Proceeding under this Agreement unless such
      failure materially prejudices the Company’s ability to defend such claim, and
      the failure to so notify the Company shall not relieve the Company from any
      liability that it may have to Indemnitee outside of this Agreement. Further,
      Indemnitee shall submit to the Company a written request, including therein
      or
      therewith such documentation and information as is reasonably available to
      Indemnitee, is reasonably necessary to determine whether and to what extent
      Indemnitee is entitled to indemnification, and is subsequently reasonably
      requested by the person or persons or entity making such determination. The
      Secretary of the Company shall, promptly upon receipt of such a request for
      indemnification, advise the Board in writing that Indemnitee has requested
      indemnification. 

     

    (b) Upon
      written request by Indemnitee for indemnification pursuant to Section 6(a),
      a
      determination, if required by applicable law, with respect to Indemnitee’s
      entitlement thereto shall be made in the specific case by one of the following
      methods, which shall be at the election of the Board: (i) by a majority vote
      of
      the Disinterested Directors (as hereinafter defined), even though less than
      a
      quorum of the Board; (ii) by a committee of Disinterested Directors designated
      by a majority vote of the Disinterested Directors, even though less than a
      quorum; (iii) if there are no Disinterested Directors or if the Disinterested
      Directors so direct, by Independent Counsel (as hereinafter defined) in a
      written opinion to the Board, a copy of which shall be delivered to Indemnitee;
      or (iv) by the stockholders of the Company. If it is so determined that
      Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
      within ten (10) days after such determination. 

     

    (c) In
      the
      event the determination of entitlement to indemnification is to be made by
      Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel
      shall be selected as provided in this Section 6(c). The Independent Counsel
      shall be selected by the Board, which shall give written notice to Indemnitee
      advising him of the identity of the Independent Counsel so selected. Indemnitee
      may, within ten (10) days after such written notice of selection shall have
      been
      received, deliver to the Company a written objection to such selection;
provided,
      however,
      that
      such objection may be asserted only on the ground that the Independent Counsel
      so selected does not meet the requirements of “Independent Counsel” as defined
      in Section 11(e) of this Agreement, and the objection shall set forth with
      particularity the factual basis of such assertion. Absent a proper and timely
      objection, the person so selected shall act as Independent Counsel. If such
      written objection is so made and substantiated, the Independent Counsel so
      selected may not serve as Independent Counsel unless and until such objection
      is
      withdrawn or a court of competent jurisdiction has determined that such
      objection is without merit. If, within twenty (20) days after submission by
      Indemnitee of a written request for indemnification pursuant to Section 6(a)
      hereof, no Independent Counsel shall have been selected and not objected to,
      either the Company or Indemnitee may petition the Delaware Court or other court
      of competent jurisdiction for resolution of any objection which shall have
      been
      made by Indemnitee to the Company’s selection of Independent Counsel and/or for
      the appointment as Independent Counsel of a person selected by the court or
      by
      such other person as the court shall designate, and the person with respect
      to
      whom all objections are so resolved or

    
      
         

      

      
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    the
      person so appointed shall act as Independent Counsel under Section 6(b) hereof.
      The Company agrees to pay the reasonable fees and expenses of Independent
      Counsel incurred by such Independent Counsel in connection with acting pursuant
      to Section 6(b) hereof, and the Company shall pay all reasonable fees and
      expense incident to the procedures of this Section 6(c), regardless of the
      manner in which such Independent Counsel was selected or appointed.

     

    (d) In
      making
      a determination with respect to entitlement to indemnification hereunder, the
      person or persons or entity making such determination shall presume that
      Indemnitee is entitled to indemnification under this Agreement if Indemnitee
      has
      submitted a request for indemnification in accordance with Section 6(a) of
      this
      Agreement, and the Company shall have the burden of proof to overcome that
      presumption in connection with the making by any person, persons or entity
      of
      any determination contrary to that presumption.

     

    (e) The
      termination of any Proceeding or of any claim, issue or matter therein, by
      judgment, order, settlement or conviction, or upon a plea of nolo
      contendere
      or its
      equivalent, shall not (except as otherwise expressly provided in this Agreement)
      of itself create a presumption that Indemnitee did not act in good faith and
      in
      a manner which he reasonably believed to be in or not opposed to the best
      interests of the Company or, with respect to any criminal Proceeding, that
      Indemnitee had reasonable cause to believe that his conduct was unlawful.

     

    (f) For
      purposes of any determination of good faith, Indemnitee shall be deemed to
      have
      acted in good faith if Indemnitee’s action is based on the records or books of
      account of the Enterprise (as hereinafter defined), including financial
      statements, or on information supplied to Indemnitee by the officers of the
      Enterprise in the course of their duties, or on the advice of legal counsel
      for
      the Enterprise or on information or records given or reports made to the
      Enterprise by an independent certified public accountant or by an appraiser
      or
      other expert selected by the Enterprise. The provisions of this Section 6(f)
      shall not be deemed to be exclusive or to limit in any way the other
      circumstances in which the Indemnitee may be deemed or found to have met the
      applicable standard of conduct set forth in this Agreement. 

     

    (g) The
      knowledge and/or actions, or failure to act, of any other director, officer,
      trustee, partner, managing member, fiduciary, agent or employee of the
      Enterprise shall not be imputed to Indemnitee for purposes of determining the
      right to indemnification under this Agreement. 

     

    7. Non-exclusivity;
      Survival of Rights; Insurance; Subrogation.
      

     

    (a) The
      rights of indemnification and to receive advancement of Expenses as provided
      by
      this Agreement shall not be deemed exclusive of any other rights to which
      Indemnitee may at any time be entitled under applicable law, the Company’s
      Certificate of Incorporation (as may be amended or restated from time to time),
      the Company’s Bylaws, any agreement, a vote of stockholders, a resolution of
      directors, or otherwise. No amendment, alteration or repeal of this Agreement
      or
      of any provision hereof shall limit or restrict any right of Indemnitee under
      this Agreement in respect of any action taken or omitted by such Indemnitee
      in
      his Corporate Status prior to such amendment, alteration or repeal. To the
      extent that a change

    
      
         

      

      
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    in
      Delaware law, whether by statute or judicial decision, permits greater
      indemnification or advancement of Expenses than would be afforded currently
      under the Company’s Bylaws or this Agreement, it is the intent of the parties
      hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
      afforded by such change. 

     

    (b) To
      the
      extent that the Company maintains an insurance policy or policies providing
      liability insurance for directors or officers of the Company or of any other
      Enterprise in respect of which such person serves at the request of the Company,
      Indemnitee shall be covered by such policy or policies in accordance with its
      or
      their terms to the maximum extent of the coverage available for any such
      director or officer under such policy or policies. If, at the time the Company
      receives notice from any source of a Proceeding as to which Indemnitee is a
      party or a participant (as a witness or otherwise), the Company has director
      liability insurance in effect, the Company shall give prompt notice of such
      Proceeding to the insurers in accordance with the procedures set forth in the
      respective policies. The Company shall thereafter take all reasonably necessary
      or desirable action to cause such insurers to pay, on behalf of the Indemnitee,
      all amounts payable as a result of such Proceeding in accordance with the terms
      of such policies. 

     

    (c) In
      the
      event of any payment under this Agreement, the Company shall be subrogated
      to
      the extent of such payment to all of the rights of recovery of Indemnitee,
      who
      shall execute all papers required and take all action necessary to secure such
      rights, including execution of such documents as are necessary to enable the
      Company to bring suit to enforce such rights. 

     

    (d) The
      Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee
      who is or was serving at the request of the Company as a director, officer,
      trustee, partner, managing member, fiduciary, employee or agent of any other
      Enterprise shall be reduced by any amount Indemnitee has actually received
      as
      indemnification or advancement of expenses from such Enterprise or from any
      insurance policy maintained by such Enterprise. 

     

    8. Duration
      of Agreement.
      All
      agreements and obligations of the Company contained herein shall continue during
      the period Indemnitee is a director or a Named Executive Officer of the Company
      (or is or was serving at the request of the Company as a director, officer,
      trustee, partner, managing member, fiduciary, employee or agent of any other
      Enterprise) and shall continue thereafter so long as Indemnitee shall be subject
      to any Proceeding by reason of his Corporate Status, whether or not he is acting
      or serving in any such capacity at the time any liability or expense is incurred
      for which indemnification can be provided under this Agreement. The Indemnitee’s
      rights under this Agreement shall inure to the benefit of his heirs, executors
      and administrators.

     

    9. Severability.
      If any
      provision nor provisions of this Agreement shall be held to be invalid, illegal
      or unenforceable for any reason whatsoever: (a) the validity, legality and
      enforceability of the remaining provisions of this Agreement (including without
      limitation, each portion of any Section, paragraph or sentence of this Agreement
      containing any such provision held to be invalid, illegal or unenforceable,
      that
      is not itself invalid, illegal or unenforceable) shall not in any way be
      affected or impaired thereby and shall remain enforceable to the fullest extent
      permitted by law; (b) such provision or provisions shall be deemed reformed
      to
      the extent

    
      
         

      

      
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    necessary
      to conform to applicable law and to give the maximum effect to the intent of
      the
      parties hereto; and (c) to the fullest extent possible, the provisions of this
      Agreement (including, without limitation, each portion of any Section, paragraph
      or sentence of this Agreement containing any such provision held to be invalid,
      illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
      shall be construed so as to give effect to the intent manifested thereby.

     

    10. Entire
      Agreement.
      This
      Agreement constitutes the entire agreement between the parties hereto with
      respect to the subject matter hereof and supersedes all prior agreements and
      understandings, oral, written and implied, between the parties hereto with
      respect to the subject matter hereof. 

     

    11. Definitions.
      For
      purposes of this Agreement, the following terms shall have the following means:
      

     

    (a) “Corporate
      Status”
      describes the status of a person who is or was a director or Named Executive
      Officer of the Company or a director, officer, trustee, general partner,
      managing member, fiduciary, employee or agent of any other Enterprise which
      such
      person is or was serving at the request of the Company. 

     

    (b) “Disinterested
      Director”
means
      a
      director of the Company who is not and was not a party to the Proceeding in
      respect of which indemnification is sought by Indemnitee. 

     

    (c) “Enterprise”
shall
      mean the Company and any other corporation, limited liability company,
      partnership, joint venture, trust, employee benefit plan or other enterprise
      of
      which Indemnitee is or was serving at the request of the Company as a director,
      officer, trustee, general partner, managing member, fiduciary, employee or
      agent. 

     

    (d) “Expenses”
shall
      include all reasonable attorneys’ fees, retainers, court costs, transcript
      costs, fees of experts, witness fees, travel expenses, duplicating costs,
      printing and binding costs, telephone charges, postage, delivery service fees,
      and all other disbursements or expenses in connection with prosecuting,
      defending, preparing to prosecute or defend, investigating, being or preparing
      to be a witness in, or otherwise participating in, a Proceeding. Expenses also
      shall include Expenses incurred in connection with any appeal resulting from
      any
      Proceeding, including without limitation the premium, security for, and other
      costs relating to any cost bond, supersedeas bond, or other appeal bond or
      its
      equivalent. Expenses, however, shall not include amounts paid in settlement
      by
      Indemnitee or the amount of judgments, fines or penalties against Indemnitee.
      

     

    (e) “Independent
      Counsel”
means
      a
      law firm, or a member of a law firm, that is experienced in matters of
      corporation law and neither presently is, nor in the past five (5) years has
      been, retained to represent: (i) the Company or Indemnitee in any matter
      material to either such party (other than with respect to matters concerning
      the
      Indemnitee under this Agreement, or of other indemnitees under similar
      indemnification agreements with the Company), or (ii) any other party to the
      Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding
      the foregoing, the term “Independent Counsel” shall not include any person who,
      under the applicable standards of professional conduct then prevailing, would
      have a

    
      
        
           

        

        
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    conflict
      of interest in representing either the Company or Indemnitee in an action to
      determine Indemnitee’s rights under this Agreement. 

     

    (f) References
      to “other
      enterprises”
shall
      include employee benefit plans; references to “fines” shall include any excise
      tax assessed with respect to any employee benefit plan; references to “serving
      at the request of the Company” shall include any service as a director, officer,
      employee or agent of the Company which imposes duties on, or involves services
      by, such director, officer, employee or agent with respect to an employee
      benefit plan, its participants or beneficiaries; and a person who acted in
      good
      faith and in a manner he reasonably believed to be in the best interests of
      the
      participants and beneficiaries of an employee benefit plan shall be deemed
      to
      have acted in a manner “not opposed to the best interests of the Company” as
      referred to in this Agreement. 

     

    (g) “Named
      Executive Officer”
shall
      have the meaning ascribed to such term in Item 402(a)(2) of Regulation S-B
      of
      the Securities Act of 1933, as amended.

     

    (h) The
      term
“Proceeding”
shall
      include any threatened, pending or completed action, suit, arbitration,
      alternate dispute resolution mechanism, investigation, inquiry, administrative
      hearing or any other actual, threatened or completed proceeding, whether brought
      in the right of the Company or otherwise and whether of a civil, criminal,
      administrative or investigative nature, in which Indemnitee was, is or will
      be
      involved as a party or otherwise by reason of the fact that Indemnitee is or
      was
      a director or Named Executive Officer of the Company, by reason of any action
      taken by him or of any inaction on his part while acting as a director or Named
      Executive Officer of the Company, or by reason of the fact that he is or was
      serving at the request of the Company as a director, officer, trustee, general
      partner, managing member, fiduciary, employee or agent of any other Enterprise,
      in each case whether or not serving in such capacity at the time any liability
      or expense is incurred for which indemnification, reimbursement, or advancement
      of expenses can be provided under this Agreement. 

     

    12. Modification
      and Waiver.
      No
      supplement, modification or amendment of this Agreement shall be binding unless
      executed in writing by the parties hereto. No waiver of any of the provisions
      of
      this Agreement shall be deemed or shall constitute a waiver of any other
      provisions of this Agreement nor shall any waiver constitute a continuing
      waiver. 

     

    13. Notices.
      All
      notices, requests, demands and other communications under this Agreement shall
      be in writing and shall be deemed to have been duly given (a) upon personal
      delivery to the party to be notified, (b) when sent by confirmed facsimile if
      sent during normal business hours of the recipient, and if not so confirmed,
      then on the next business day, (c) five (5) business days after having been
      sent
      by registered or certified mail, return receipt requested, postage prepaid,
      or
      (d) one (1) business day after deposit with a nationally recognized overnight
      courier, specifying next business day delivery, with written verification of
      receipt. All communications shall be sent:

     

    (i) If
      to
      Indemnitee, at the address indicated on the signature page of this Agreement,
      or
      such other address as Indemnitee shall provide in writing to the Company.

    
      
         

      

      
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    (ii) If
      to the
      Company to: 

     

    BPO
      Management Services, Inc.

    1290
      N.
      Hancock, Suite 202

    Anaheim,
      California 92807

    Attention:
      Chairman & CEO

    Facsimile
      No.: (714) 974-4771

    

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

    

    Bryan
      Cave LLP

    1900
      Main
      Street, Suite 700

    Irvine,
      California 92614

    Attention:
      Randolf W. Katz, Esq.

    Facsimile
      No.: (949) 223-7100

    

    and
      

    

    Cornman
      & Swartz

    19800
      MacArthur Boulevard, Suite 820

    Irvine,
      California 92612

    Attention:
      Jack T. Cornman, Esq.

    Facsimile
      No.: (949) 224-1505

    

    or
      to any
      other address as may have been furnished to Indemnitee in writing by the
      Company. 

    

    14. Contribution.
      To the
      fullest extent permissible under applicable law, if the indemnification provided
      for in this Agreement is unavailable to Indemnitee in whole or in part for
      any
      reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall
      contribute to the amount incurred by Indemnitee, whether for judgments, fines,
      penalties, excise taxes, amounts paid or to be paid in settlement and/or for
      Expenses, in connection with any claim relating to an indemnifiable event under
      this Agreement, in such proportion as is deemed fair and reasonable in light
      of
      all of the circumstances of such Proceeding in order to reflect (i) the relative
      benefits received by the Company and Indemnitee as a result of the event(s)
      and/or transaction(s) giving cause to such Proceeding; and (ii) the relative
      fault of the Company (and its directors, officers, employees and agents) and
      Indemnitee in connection with such event(s) and/or transaction(s).

     

    15. Applicable
      Law and Consent to Jurisdiction.
      This
      Agreement and the legal relations among the parties shall be governed by, and
      construed and enforced in accordance with, the laws of the State of Delaware,
      without regard to its conflict of laws rules. The Company and Indemnitee hereby
      irrevocably and unconditionally (i) agree that any action or proceeding arising
      out of or in connection with this Agreement shall be brought only in the Court
      of Chancery of the State of Delaware (the “Delaware
      Court”),
      and
      not in any other state or federal court in the United States of America or
      any
      court in any other country, (ii) consent to submit to the exclusive jurisdiction
      of the Delaware Court for purposes of any action or proceeding arising out
      of or
      in connection with this Agreement, (iii) appoint, to the extent such party
      is
      not a resident of

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    the
      State
      of Delaware, irrevocably ___________________________ as its agent in the State
      of Delaware as such party’s agent for acceptance of legal process in connection
      with any such action or proceeding against such party with the same legal force
      and validity as if served upon such party personally within the State of
      Delaware, (iv) waive any objection to the laying of venue of any such action
      or
      proceeding in the Delaware Court, and (v) waive, and agree not to plead or
      to
      make, any claim that any such action or proceeding brought in the Delaware
      Court
      has been brought in an improper or inconvenient forum. 

     

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

     

    17. Miscellaneous.
      Use of
      the masculine pronoun shall be deemed to include usage of the feminine pronoun
      where appropriate. The headings of the paragraphs of this Agreement are inserted
      for convenience only and shall not be deemed to constitute part of this
      Agreement or to affect the construction thereof. 

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement
      on and as of the day and year first above written.

     

    BPO
      MANAGEMENT SERVICES, INC.

     

    By:

    
      
        

      

    

    Name:

    Title:

    

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement
      on and as of the day and year first above written.

     

    DIRECTOR:

     

    ______________________________________

    Name:

     

    Address:

    __________________________

    __________________________

    __________________________

    
 

     

     

     

    [SIGNATURE
      PAGE TO INDEMNIFICATION AGREEMENT - DIRECTOR]

     

    
      
         

      

      
        -12-SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE

     

     

    AGREEMENT

     

     

     

     

     

     

    Dated
      as of June 13, 2007

     

     

     

     

    among

     

     

     

     

    BPO
      MANAGEMENT SERVICES, INC.

     

     

     

     

    and

     

     

     

     

    THE
      PURCHASERS LISTED ON EXHIBIT A

     

    

    
       

      
        
        

        
          

          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

     

    Page

    
      	
              ARTICLE
                I PURCHASE AND SALE OF PREFERRED STOCK

            	
              1

            
	
              1.1

            	
              Purchase
                and Sale of Stock

            	
              1

            
	
              1.2

            	
              Warrants

            	
              1

            
	
              1.3

            	
              Conversion
                Shares

            	
              2

            
	
              1.4

            	
              Purchase
                Price and Closing

            	
              2

            
	 	 
	
              ARTICLE
                II REPRESENTATIONS AND WARRANTIES

            	
              3

            
	
              2.1

            	
              Representations
                and Warranties of the Company

            	
              3

            
	
              2.2

            	
              Representations
                and Warranties of the Purchasers

            	
              18

            
	 	 
	
              ARTICLE
                III COVENANTS

            	
              20

            
	
              3.1

            	
              Securities
                Compliance

            	
              20

            
	
              3.2

            	
              Registration
                and Listing

            	
              20

            
	
              3.3

            	
              Inspection
                Rights

            	
              21

            
	
              3.4

            	
              Compliance
                with Laws

            	
              21

            
	
              3.5

            	
              Keeping
                of Records and Books of Account

            	
              21

            
	
              3.6

            	
              Reporting
                Requirements

            	
              21

            
	
              3.7

            	
              Amendments

            	
              22

            
	
              3.8

            	
              Other
                Agreements

            	
              22

            
	
              3.9

            	
              Distributions

            	
              22

            
	
              3.10

            	
              Status
                of Dividends

            	
              22

            
	
              3.11

            	
              Use
                of Proceeds

            	
              23

            
	
              3.12

            	
              Indebtedness

            	
              24

            
	
              3.13

            	
              Reservation
                of Shares

            	
              24

            
	
              3.14

            	
              Transfer
                Agent Instructions

            	
              24

            
	
              3.15

            	
              Disposition
                of Assets

            	
              25

            
	
              3.16

            	
              Reporting
                Status

            	
              25

            
	
              3.17

            	
              Disclosure
                of Transaction

            	
              25

            
	
              3.18

            	
              Disclosure
                of Material Information

            	
              25

            
	
              3.19

            	
              Pledge
                of Securities

            	
              26

            
	
              3.20

            	
              Form
                SB-2 Eligibility

            	
              26

            
	
              3.21

            	
              Lock-Up
                Agreement

            	
              26

            
	
              3.22

            	
              DTC
                Status

            	
              26

            
	
              3.23

            	
              Variable
                Rate Transactions; Additional Registration Statements

            	
              26

            
	
              3.24

            	
              Financial
                Covenants

            	
              27

            
	 	 
	
              ARTICLE
                IV CONDITIONS

            	
              30

            
	
              4.1

            	
              Conditions
                Precedent to the Obligation of the Company to Sell the
                Shares

            	
              30

            
	
              4.2

            	
              Conditions
                Precedent to the Obligation of the Purchasers to Purchase the
                Shares

            	
              30

            
	 	 
	
              ARTICLE
                V STOCK CERTIFICATE LEGEND

            	
              33

            
	
              5.1

            	
              Legend

            	
              33

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              ARTICLE
                VI RIGHTS OF FIRST OFFER

            	
              1

            
	
              6.1

            	
              Subsequent
                Offerings

            	
              1

            
	
              6.2

            	
              Exercise
                of Rights

            	
              1

            
	
              6.3

            	
              Issuance
                of Equity Securities to Other Persons

            	
              1

            
	
              6.4

            	
              Termination
                and Waiver of Rights of First Offer

            	
              2

            
	
              6.5

            	
              Excluded
                Securities

            	
              2

            
	 	 
	
              ARTICLE
                VII INDEMNIFICATION

            	
              3

            
	
              7.1

            	
              Company
                Indemnity

            	
              3

            
	
              7.2

            	
              Indemnification
                Procedure

            	
              3

            
	 	 
	
              ARTICLE
                VIII TRIGGERING EVENTS

            	
              4

            
	
              8.1

            	
              Enforceability
                of Certificate of Designation

            	
              4

            
	
              8.2

            	
              Waiver
                of Triggering Event

            	
              4

            
	
              8.3

            	
              Officers'
                Certificate

            	
              4

            
	 	 
	
              ARTICLE
                IX MISCELLANEOUS

            	
              5

            
	
              9.1

            	
              Fees
                and Expenses

            	
              5

            
	
              9.2

            	
              Specific
                Enforcement, Consent to Jurisdiction

            	
              5

            
	
              9.3

            	
              Entire
                Agreement; Amendment

            	
              6

            
	
              9.4

            	
              Notices

            	
              6

            
	
              9.5

            	
              Waivers

            	
              7

            
	
              9.6

            	
              Headings

            	
              7

            
	
              9.7

            	
              Successors
                and Assigns

            	
              7

            
	
              9.8

            	
              No
                Third Party Beneficiaries

            	
              7

            
	
              9.9

            	
              Governing
                Law

            	
              7

            
	
              9.10

            	
              Survival

            	
              8

            
	
              9.11

            	
              Counterparts

            	
              8

            
	
              9.12

            	
              Publicity

            	
              8

            
	
              9.13

            	
              Severability

            	
              8

            
	
              9.14

            	
              Further
                Assurances

            	
              8

            
	
              9.15

            	
              2007
                Management Option Plan

            	
              8

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

     

    This
      SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
      is
      dated as of June 13, 2007 by and among BPO Management Services, Inc., a Delaware
      corporation (the "Company"),
      and
      each of the Purchasers of shares of Series D Convertible Preferred Stock of
      the
      Company whose names are set forth on Exhibit
      A
      hereto
      (individually, a "Purchaser"
      and
      collectively, the "Purchasers").

     

    The
      parties hereto agree as follows:

     

    ARTICLE
      I

     

    PURCHASE
      AND SALE OF PREFERRED STOCK

     

    1.1 Purchase
      and Sale of Stock.
      Upon
      the following terms and conditions, the Company shall issue and sell to the
      Purchasers and each of the Purchasers shall purchase from the Company, the
      number of shares of the Company's Series D Convertible Preferred Stock, par
      value $0.01 per share and stated value of $9.60 per share (the "Preferred
      Shares"),
      each
      Preferred Share initially convertible into shares of the Company's common stock,
      par value $0.01 per share (the "Common
      Stock")
      at the
      Conversion Price (as defined in the Certificate of Designation (as defined
      below)), which shall initially be $0.60, subject to adjustment as set forth
      therein, in the amounts set forth opposite such Purchaser's name on Exhibit
      A
      hereto. The designation, rights, preferences and other terms and provisions
      of
      the Series D Convertible Preferred Stock are set forth in the Certificate of
      Designation of the Relative Rights and Preferences of the Series D Convertible
      Preferred Stock attached hereto as Exhibit B (the "Certificate
      of Designation").
      The
      Company and the Purchasers are executing and delivering this Agreement in
      accordance with and in reliance upon the exemption from securities registration
      afforded by Rule 506 of Regulation D ("Regulation
      D")
      as
      promulgated by the United States Securities and Exchange Commission (the
      "Commission")
      under
      the Securities Act of 1933, as amended (the "Securities
      Act")
      or
      Section 4(2) of the Securities Act.

     

    1.2 Warrants.
      Upon
      the following terms and conditions and for no additional consideration, each
      of
      the Purchasers shall be issued (i) Series A Warrants, in substantially the
      form
      attached hereto as Exhibit
      C-1
      (the
      "Series
      A Warrants"),
      each
      to purchase the number of shares of Common Stock equal to fifty percent (50%)
      of
      the number of shares of Common Stock into which the Preferred Shares purchased
      by each Purchaser pursuant to the terms of this Agreement are convertible,
      as
      set forth opposite such Purchaser's name on Exhibit
      A
      hereto,
      (ii) Series B Warrants, in substantially the form attached hereto as
Exhibit
      C-2
      (the
      "Series
      B Warrants"),
      each
      to purchase the number of shares of Common Stock equal to one hundred percent
      (100%) of the number of shares of Common Stock into which the Preferred Shares
      purchased by each Purchaser pursuant to the terms of this Agreement are
      convertible, as set forth opposite such Purchaser's name on Exhibit
      A
      hereto,
      (iii) Series J Warrants, in substantially the form attached hereto as
Exhibit
      C-3
      (the
      "Series
      J Warrants"),
      to
      purchase the number of shares of the Company's Series D-2

    

    
      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

    

    

    Convertible
      Preferred Stock (the "J
      Warrant Shares"),
      each
      J Warrant Share with a stated value of $14.40 per share, each share of which
      will be convertible into common stock at the conversion price set forth in
      the
      Series D-2 Certificate of Designation, which shall initially be $0.90, subject
      to adjustment as set forth therein, equal to one hundred percent (100%) of
      the
      number of Preferred Shares purchased by each Purchaser, as set forth opposite
      such Purchaser's name on Exhibit
      A
      hereto,
      (iv) Series C Warrants, in substantially the form attached hereto as
Exhibit
      C-4
      (the
      "Series
      C Warrants"),
      to
      purchase the number of shares of Common Stock equal to fifty percent (50%)
      of
      the number of shares of Common Stock into which the Preferred Shares purchased
      by each Purchaser pursuant to the terms of this Agreement are convertible,
      as
      set forth opposite such Purchaser's name on Exhibit
      A
      hereto,
      and (v) Series D Warrants, in substantially the form attached hereto as
Exhibit
      C-5
      (the
      "Series
      D Warrants"
      and,
      together with the Series A Warrants, the Series B Warrants, the Series J
      Warrants and the Series C Warrants, the "Warrants"),
      each
      to purchase the number of shares of Common Stock equal to one hundred percent
      (100%) of the number of shares of Common Stock into which the Preferred Shares
      purchased by each Purchaser pursuant to the terms of this Agreement are
      convertible, as set forth opposite such Purchaser's name on Exhibit
      A
      hereto.
      Each of the Warrants shall have an exercise price per share equal to the Warrant
      Price (as defined in the applicable Warrant) and shall expire as provided
      therein.
      The
      designation, rights, preferences and other terms and provisions of the Series
      D-2 Preferred Stock are set forth in the Certificate of Designation of the
      Relative Rights and Preferences of the Series D-2 Convertible Preferred Stock
      attached hereto as Exhibit
      J
      (the
      "J
      Warrant Shares Certificate of Designation").
      

     

    1.3 Conversion
      Shares.
      The
      Company has authorized and has reserved and covenants to continue to reserve,
      free of preemptive rights and other similar contractual rights of stockholders,
      a number of shares of Common Stock equal to one hundred twenty percent (120%)
      of
      the number of shares of Common Stock as shall from time to time be sufficient
      to
      effect the conversion of all of the Preferred Shares and exercise of the
      Warrants then outstanding. Any shares of Common Stock or J Warrant Shares
      issuable upon conversion of the Preferred Shares or exercise of the Warrants
      (and such shares when issued) are herein referred to as the "Conversion
      Shares"
      and the
      "Warrant
      Shares",
      respectively. The Preferred Shares, the Conversion Shares and the Warrant Shares
      are collectively referred to as the "Shares".

     

    1.4 Purchase
      Price and Closing.
      Subject
      to the terms and conditions hereof, the Company agrees to issue and sell to
      the
      Purchasers and, in consideration of and in express reliance upon the
      representations, warranties, covenants, terms and conditions of this Agreement,
      the Purchasers, severally but not jointly, agree to purchase the Preferred
      Shares and the Warrants for an aggregate purchase price of up to $14,000,000
      (the "Purchase
      Price").
      The
      Preferred Shares and Warrants shall be sold and funded in a single closing
      (the
      "Closing").
      The
      Closing shall take place on or about June 13, 2007 (the "Closing
      Date"),
      but
      in no event later than June 30, 2007. The Closing shall take place at the
      offices of Sheppard, Mullin, Richter & Hampton LLP, 333 S. Hope Street, 48th
      Floor, Los Angeles, CA 90071 at 10:00 a.m., California time. Subject to the
      terms and conditions of this Agreement, at the Closing the Company shall deliver
      or cause to be delivered to each Purchaser (x) a certificate for the number
      of
      Preferred Shares set forth opposite the name of such Purchaser

    

    
      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

    

    

    on
      Exhibit
      A
      hereto,
      (y) its Warrants to purchase such number of shares of Common Stock as is set
      forth opposite the name of such Purchaser on Exhibit
      A
      attached
      hereto and (z) any other documents required to be delivered pursuant to Article
      IV hereof. At the Closing, each Purchaser shall deliver its Purchase Price
      by
      wire transfer to an escrow account designated by the Escrow Agent (as defined
      below).
      The
      Purchase Price shall be disbursed pursuant to the terms of the Escrow Agreement
      (as defined in Section 2.1(b)).

     

    ARTICLE
      II

     

    REPRESENTATIONS
      AND WARRANTIES

     

    2.1 Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Purchasers, as of the date hereof
      and the Closing Date (except as set forth on the Schedule of Exceptions attached
      hereto with each numbered Schedule corresponding to the section number herein),
      as follows:

     

    (a) Organization,
      Good Standing and Power.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has the requisite corporate power
      to
      own, lease and operate its properties and assets and to conduct its business
      as
      it is now being conducted. The Company does not have any subsidiaries except
      as
      set forth on Schedule
      2.1(g)
      hereto.
      The Company and each such subsidiary is duly qualified as a foreign corporation
      to do business and is in good standing in every jurisdiction in which the nature
      of the business conducted or property owned by it makes such qualification
      necessary except for any jurisdiction(s) (alone or in the aggregate) in which
      the failure to be so qualified will not have a Material Adverse Effect (as
      defined in Section 2.1(h) hereof) on the Company's financial
      condition.

     

    (b) Authorization;
      Enforcement.
      The
      Company has the requisite corporate power and authority to enter into and
      perform this Agreement, the Registration Rights Agreement in the form attached
      hereto as Exhibit
      D
      (the
      "Registration
      Rights Agreement"),
      the
      Lock-Up Agreement (as defined in Section 3.21 hereof) in the form attached
      hereto as Exhibit
      E,
      the
      Escrow Agreement by and among the Company, the Purchasers and the escrow agent
      named therein (the "Escrow
      Agent"),
      dated
      as of the date hereof, substantially in the form of Exhibit
      F
      attached
      hereto (the "Escrow
      Agreement"),
      the
      Irrevocable Transfer Agent Instructions (as defined in Section 3.14), the
      Certificate of Designation, and the Warrants (collectively, the "Transaction
      Documents")
      and to
      issue and sell the Shares and the Warrants in accordance with the terms hereof.
      The execution, delivery and performance of the Transaction Documents by the
      Company and the consummation by it of the transactions contemplated hereby
      and
      thereby have been duly and validly authorized by all necessary corporate action,
      and no further consent or authorization of the Company or its Board of Directors
      or stockholders is required. This Agreement has been duly executed and delivered
      by the Company. The other Transaction Documents will have been duly executed
      and
      delivered by the Company at the Closing. Each of the Transaction Documents
      constitutes, or shall constitute when executed and delivered, a valid and
      binding obligation of the Company enforceable against the Company in accordance
      with its terms, except as such enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization, moratorium, liquidation,
      conservatorship, receivership or similar laws relating to, or
      affecting generally the enforcement of, creditor's rights and remedies or by
      other equitable principles of general application.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (c) Capitalization.
      The
      authorized capital stock of the Company and the shares thereof currently issued
      and outstanding as of the date hereof are set forth on Schedule
      2.1(c)
      hereto.
      All of the outstanding shares of the Common Stock and the Preferred Shares
      have
      been duly and validly authorized. Except as set forth on Schedule
      2.1(c)
      hereto,
      no shares of Common Stock are entitled to preemptive rights or registration
      rights and there are no outstanding options, warrants, scrip, rights to
      subscribe to, call or commitments of any character whatsoever relating to,
      or
      securities or rights convertible into, any shares of capital stock of the
      Company. There are no contracts, commitments, understandings, or arrangements
      by
      which the Company is or may become bound to issue additional shares of the
      capital stock of the Company or options, securities or rights convertible into
      shares of capital stock of the Company. The Company is not a party to any
      agreement granting registration or anti-dilution rights to any person with
      respect to any of its equity or debt securities. The Company is not a party
      to,
      and it has no knowledge of, any agreement restricting the voting or transfer
      of
      any shares of the capital stock of the Company. The offer and sale of all
      capital stock, convertible securities, rights, warrants, or options of the
      Company issued prior to the Closing complied with all applicable Federal and
      state securities laws, and no stockholder has a right of rescission or claim
      for
      damages with respect thereto. The Company has furnished or made available to
      the
      Purchasers true and correct copies of the Company's Certificate of Incorporation
      as in effect on the date hereof (the "Certificate"),
      and
      the Company's Bylaws as in effect on the date hereof (the "Bylaws").

     

    (d) Issuance
      of Shares.
      The
      Preferred Shares to be issued and the Warrants to be granted at the Closing
      have
      been duly authorized by all necessary corporate action and the Preferred Shares,
      when paid for or issued in accordance with the terms hereof, shall be validly
      issued and outstanding, fully paid and nonassessable and entitled to the rights
      and preferences set forth in the Certificate of Designation. When the Conversion
      Shares and the Warrant Shares are issued in accordance with the terms of the
      Certificate of Designation and the Warrants, respectively, such shares will
      be
      duly authorized by all necessary corporate action and validly issued and
      outstanding, fully paid and nonassessable, and the holders shall be entitled
      to
      all rights accorded to a holder of Common Stock.

     

    (e) No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by the Company,
      the performance by the Company of its obligations under the Certificate of
      Designation and the consummation by the Company of the transactions contemplated
      herein and therein do not and will not (i) violate any provision of the
      Company's Certificate or Bylaws, (ii) conflict with, or constitute a default
      (or
      an event which with notice or lapse of time or both would become a default)
      under, or give to others any rights of termination, amendment, acceleration
      or
      cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
      license, lease agreement, instrument or obligation to which the Company is
      a
      party or by which it or its properties or assets are bound, (iii) create or
      impose a lien, mortgage, security interest, charge or encumbrance of any nature
      on any property of the Company under any agreement or any commitment to which
      the Company is a party or by which the Company is bound or by which any of
      its
      respective properties or assets are bound, or (iv) result in a
      violation

    
      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

    

    

    of
      any
      federal, state, local or foreign statute, rule, regulation, order, judgment
      or
      decree (including Federal and state securities laws and regulations) applicable
      to the Company or any of its subsidiaries or by which any property or asset
      of
      the Company or any of its subsidiaries are bound or affected, except, in cases
      other than violations pursuant to clauses (i) and (iv) above, for such
      conflicts, defaults, terminations, amendments, accelerations and violations
      as
      would not, individually or in the aggregate, have a Material Adverse Effect
      (as
      defined in Section 2.1(h)). The business of the Company and its subsidiaries
      is
      not being conducted in violation of any laws, ordinances or regulations of
      any
      governmental entity, except for possible violations which singularly or in
      the
      aggregate do not or will not have a Material Adverse Effect (as defined in
      Section 2.1(h)). The Company is not required under Federal, state or local
      law,
      rule or regulation to obtain any consent, authorization or order of, or make
      any
      filing or registration with, any court or governmental agency in order for
      it to
      execute, deliver or perform any of its obligations under the Transaction
      Documents, or issue and sell the Preferred Shares, the Warrants, the Conversion
      Shares and the Warrant Shares in accordance with the terms hereof or thereof
      (other than any filings which may be required to be made by the Company with
      the
      Commission or state securities administrators subsequent to the Closing, any
      registration statement which may be filed pursuant hereto or any other
      Transaction Document); provided
      that,
      for purposes of the representation made in this sentence, the Company is
      assuming and relying upon the accuracy of the relevant representations and
      agreements of the Purchasers herein.

     

    (f) Financial
      Statements.
      The
      Company has delivered to the Purchasers true and complete copies of the
      Company's audited financial statements for the fiscal year ended December 31,
      2006 (the "Audited
      Financial Statements Date")
      and
      unaudited financial statements for the fiscal quarter ended March 31, 2007
      (collectively, the "Financial
      Statements").
      Except as disclosed on Schedule
      2.1(f)
      hereto,
      the Financial Statements complied in all material respects with the requirements
      of the Securities Exchange Act of 1934, as amended (the "Exchange
      Act"),
      and
      the rules and regulations of the Commission promulgated thereunder, and the
      Financial Statements do not contain any untrue statement of a material fact
      or
      omit to state a material fact required to be stated therein or necessary in
      order to make the statements therein, in light of the circumstances under which
      they were made, not misleading. Except as disclosed on Schedule
      2.1(f)
      hereto,
      as of their respective dates, the Financial Statements were complete and correct
      in all material respects and complied with applicable accounting requirements
      and the published rules and regulations of the Commission or other applicable
      rules and regulations with respect thereto. Such Financial Statements have
      been
      prepared in accordance with accounting principles generally accepted in the
      United States ("GAAP")
      applied on a consistent basis during the periods involved (except (i) as may
      be
      otherwise indicated in such financial statements or the Notes thereto or (ii)
      in
      the case of unaudited interim statements, to the extent they may not include
      footnotes or may be condensed or summary statements), and fairly present in
      all
      material respects the financial position of the Company and its subsidiaries
      as
      of the dates thereof and the results of operations and cash flows for the
      periods then ended (subject, in the case of unaudited statements, to normal
      year-end audit adjustments).

     

    (g) Subsidiaries.
      Schedule
      2.1(g)
      hereto
      sets forth each subsidiary of the Company, showing the jurisdiction of its
      incorporation or organization and showing the percentage of each person's
      ownership. For the purposes of this Agreement, "subsidiary"
      shall

    

    
      
        
          
          

        

        
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    mean
      any
      corporation or other entity of which at least a majority of the securities
      or
      other ownership interest having ordinary voting power (absolutely or
      contingently) for the election of directors or other persons performing similar
      functions are at the time owned directly or indirectly by the Company and/or
      any
      of its other subsidiaries. All of the outstanding shares of capital stock of
      each subsidiary have been duly authorized and validly issued, and are fully
      paid
      and nonassessable. There are no outstanding preemptive, conversion or other
      rights, options, warrants or agreements granted or issued by or binding upon
      any
      subsidiary for the purchase or acquisition of any shares of capital stock of
      any
      subsidiary or any other securities convertible into, exchangeable for or
      evidencing the rights to subscribe for any shares of such capital stock. Neither
      the Company nor any subsidiary is subject to any obligation (contingent or
      otherwise) to repurchase or otherwise acquire or retire any shares of the
      capital stock of any subsidiary or any convertible securities, rights, warrants
      or options of the type described in the preceding sentence. Neither the Company
      nor any subsidiary is party to, nor has any knowledge of, any agreement
      restricting the voting or transfer of any shares of the capital stock of any
      subsidiary.

     

    (h) No
      Material Adverse Change.
      Since
      the Audited Financial Statements Date, the Company has not experienced or
      suffered any Material Adverse Effect or any event that is likely, through the
      passage of time or otherwise, to result in a Material Adverse Effect. For the
      purposes of this Agreement, "Material
      Adverse Effect"
      means
      any material adverse effect on the business, properties, assets, operations,
      results of operations, condition (financial or otherwise) or prospects of the
      Company and its Subsidiaries, taken as a whole, or on the transactions
      contemplated hereby and the other Transaction Documents or by the agreements
      and
      instruments to be entered into in connection herewith or therewith, or on the
      authority or ability of the Company to perform its obligations under the
      Transaction Documents and/or any condition, circumstance, or situation that
      would prohibit or otherwise materially interfere with the ability of the Company
      to perform any of its obligations under the Transaction Documents in any
      material respect.

     

    (i) No
      Undisclosed Liabilities.
      Since
      the Audited Financial Statements Date, neither the Company nor any of its
      subsidiaries has incurred any liabilities, obligations, claims or losses
      (whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
      contingent or otherwise) other than those incurred in the ordinary course of
      the
      Company's or its subsidiaries respective businesses. Since the Audited Financial
      Statements Date, none of the Company or any of its subsidiaries has participated
      in any transaction which is outside of the ordinary course of its
      business.

     

    (j) No
      Undisclosed Events or Circumstances.
      No
      event or circumstance has occurred or exists with respect to the Company or
      its
      subsidiaries or their respective businesses, properties, prospects, operations
      or financial condition, which, under applicable law, rule or regulation,
      requires public disclosure or announcement by the Company but which has not
      been
      so publicly announced or disclosed.

     

    (k) Indebtedness.
      Schedule
      2.1(k)
      hereto
      sets forth as of April 30, 2007 all outstanding secured and unsecured
      Indebtedness of the Company or any subsidiary, or for which the Company or
      any
      subsidiary has commitments. Except as set forth on Schedule
      2.1(k),
      the
      Company has no Indebtedness. For the purposes of this Agreement, "Indebtedness"
      means
      (i) all

    

    
      
        
          
          

        

        
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    indebtedness
      for borrowed money or amounts owed in excess of $50,000 (other than trade
      accounts payable incurred in the ordinary course of business), (ii) all
      obligations issued, undertaken or assumed as the deferred purchase price of
      property or services including, without limitation, Capitalized Lease
      Obligations (other than trade payables entered into in the ordinary course
      of
      business), (iii) all reimbursement or payment obligations with respect to
      letters of credit, surety bonds and other similar instruments, (iv) all
      obligations evidenced by notes, bonds, debentures or similar instruments,
      including obligations so evidenced incurred in connection with the acquisition
      of property, assets or businesses, (v) all indebtedness created or arising
      under any conditional sale or other title retention agreement, or incurred
      as
      financing, in either case with respect to any property or assets acquired with
      the proceeds of such indebtedness (even though the rights and remedies of the
      seller or bank under such agreement in the event of default are limited to
      repossession or sale of such property), (vi) all rental obligations of the
      Company and its subsidiaries which, under GAAP, are or will be required to
      be
      capitalized on the books of the Company and its subsidiaries, in each case
      taken
      at the amount thereof accounted for as indebtedness in accordance with such
      principles (the "Capitalized
      Lease Obligations"),
      (vii) all indebtedness referred to in clauses (i) through (vi) above
      secured by (or for which the holder of such Indebtedness has an existing right,
      contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
      security interest or other encumbrance upon or in any property or assets
      (including accounts and contract rights) owned by such Person, even though
      the
      Person which owns such assets or property has not assumed or become liable
      for
      the payment of such indebtedness, and (vii) all guaranties, endorsements
      and other contingent obligations in respect of Indebtedness of others, whether
      or not the same are or should be reflected in the Company's balance sheet (or
      the notes thereto), except guaranties by endorsement of negotiable instruments
      for deposit or collection or similar transactions in the ordinary course of
      business of the kinds referred to in clauses (i) through (vi)
      above.

     

    (l) Title
      to Assets.
      Each of
      the Company and the subsidiaries has good and marketable title to all of its
      real and personal property whether tangible or intangible (collectively, the
      "Assets"),
      free
      and clear of any mortgages, pledges, charges, liens, security interests, claim,
      community property interest, condition, equitable interest or other
      encumbrances, license, option, right of first refusal or restriction of any
      kind, including any restriction on use, voting, transfer, receipt of income
      or
      exercise of any other attribute of ownership ("Liens").
      All
      leases of the Company and each of its subsidiaries are valid and subsisting
      and
      in full force and effect and neither this Agreement nor the transactions
      contemplated hereby will give any party to such leases any right to terminate
      or
      modify the leases. All Assets are in good working order (subject to normal
      wear
      and tear) and suitable for the Company's business.

     

    (m) Actions
      Pending.
      There
      is no action, suit, claim, investigation, arbitration, alternate dispute
      resolution proceeding or any other proceeding pending or, to the knowledge
      of
      the Company, threatened against the Company or any subsidiary which questions
      the validity of this Agreement or any of the other Transaction Documents or
      the
      transactions contemplated hereby or thereby or any action taken or to be taken
      pursuant hereto or thereto. Except as set forth on Schedule
      2.1(m)
      hereto,
      there is no action, suit, claim, investigation, arbitration, alternate dispute
      resolution proceeding or any other proceeding pending or, to the knowledge
      of
      the Company, threatened, against or involving the Company, any subsidiary or
      any
      of their

     

    

    
      
        
          
          

        

        
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    respective
      properties or assets. There are no outstanding orders, judgments, injunctions,
      awards or decrees of any court, arbitrator or governmental or regulatory body
      against the Company or any subsidiary or any officers or directors of the
      Company or subsidiary in their capacities as such.

     

    (n) Compliance
      with Law.
      The
      business of the Company and the subsidiaries has been and is presently being
      conducted in accordance with all applicable federal, state and local
      governmental laws, rules, regulations and ordinances, except for such
      noncompliance that, individually or in the aggregate, would not cause a Material
      Adverse Effect. The Company and each of its subsidiaries have all franchises,
      permits, licenses, consents and other governmental or regulatory authorizations
      and approvals necessary for the conduct of its business as now being conducted
      by it unless the failure to possess such franchises, permits, licenses, consents
      and other governmental or regulatory authorizations and approvals, individually
      or in the aggregate, could not reasonably be expected to have a Material Adverse
      Effect.

     

    (o) Taxes.
      The
      Company and each of the subsidiaries has accurately prepared and filed all
      foreign, federal, state income and all other tax returns, reports and
      declarations required by law to be paid or filed by it by any jurisdiction
      to
      which the Company is subject, has paid or made provisions for the payment of
      all
      taxes shown to be due and all additional assessments, and adequate provisions
      have been and are reflected in the financial statements of the Company and
      the
      subsidiaries for all current taxes and other charges to which the Company or
      any
      subsidiary is subject and which are not currently due and payable. None of
      the
      federal income tax returns of the Company or any subsidiary have been audited
      by
      the Internal Revenue Service. The Company has no knowledge of any additional
      assessments, adjustments or contingent tax liability (whether federal or state)
      of any nature whatsoever, whether pending or threatened against the Company
      or
      any subsidiary for any period, nor of any basis for any such assessment,
      adjustment or contingency. The Company and its subsidiaries have complied in
      all
      respects with all applicable legal requirements relating to the payment and
      withholding of taxes and, within the time and in the manner prescribed by law,
      has withheld from wages, fees and other payments, and paid over to the proper
      governments or regulatory authorities, all amounts required.

     

    (p) Certain
      Fees.
      Except
      as set forth on Schedule
      2.1(p)
      hereto,
      no brokers, finders or financial advisory fees or commissions will be payable
      by
      the Company or any subsidiary or any Purchaser with respect to the transactions
      contemplated by this Agreement.

     

    (q) Disclosure.
      Neither
      this Agreement or the Schedules hereto nor any other documents, certificates
      or
      instruments furnished to the Purchasers by or on behalf of the Company or any
      subsidiary in connection with the transactions contemplated by this Agreement
      contain any untrue statement of a material fact or omit to state a material
      fact
      necessary in order to make the statements made herein or therein, in the light
      of the circumstances under which they were made herein or therein, not
      misleading.

     

    (r) Intellectual
      Property; Software.
      "Intellectual
      Property"
      means:
      (a) inventions and discoveries (whether or not patentable and whether or not
      reduced to practice), improvements thereto, and patents, patent applications,
      invention disclosures, and other rights of invention, worldwide, including
      without limitation any reissues, divisions, continuations and

    

    
      
        
          
          

        

        
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    continuations-in-part,
      provisionals, reexamined patents or other applications or patents claiming
      the
      benefit of the filing date of any such application or patent; (b) trademarks,
      service marks, trade names, trade dress, logos, domain names, product names
      and
      slogans, including any common law rights, registrations, and applications for
      registration for any of the foregoing, and the goodwill associated with all
      of
      the foregoing, worldwide; (c) copyrightable works, all rights in copyrights,
      including moral rights, copyrights, website content, and other rights of
      authorship and exploitation, and any applications, registrations and renewals
      in
      connection therewith, worldwide; (d) trade secrets and confidential business
      and
      technical information, including, without limitation, web site user information,
      customer and supplier lists and related information, pricing and cost
      information, business and marketing plans, advertising statistics, any other
      financial, marketing and business data, technical data, specifications,
      schematics and know-how; (e) to the extent not covered by subsections (a)
      through (d), above, Software and web sites (including all related computer
      code
      and content); (f) rights to exclude others from appropriating any of such
      Intellectual Property, including the rights to sue for and remedies against
      past, present and future infringements of any or all of the foregoing and rights
      of priority and protection of interests therein; and (g) any other proprietary,
      intellectual property and other rights relating to any or all of the foregoing
      anywhere in the world.

     

    (i) Schedule
      2.1(r)(i)
      hereto
      sets forth a true, correct and complete list of all material Intellectual
      Property, and any licenses and agreements relating to the Intellectual Property
      (other than trade secrets, know-how and goodwill attendant to the Intellectual
      Property and other intellectual property rights not reducible to schedule form)
      owned, licensed to or used by Company with respect to the conduct of the
      business as presently conducted or presently proposed to be conducted.
Schedule
      2.1(r)(i)
      separately identifies the Intellectual Property owned by Company and the
      Intellectual Property licensed to or used by Company.

     

    (ii) Except
      as
      set forth on Schedule
      2.1(r)(ii),
      the
      Company has not interfered with, infringed upon or misappropriated any
      Intellectual Property rights of any third party, and the Company (and management
      level employees with direct responsibility for Intellectual Property matters)
      has never received any charge, complaint, claim, demand, or notice alleging
      any
      such interference, infringement, misappropriation, or violation (including
      any
      claim that the Company must license or refrain from using any Intellectual
      Property rights of any third party). To the knowledge of the Company, no third
      party has interfered with, infringed upon or misappropriated any Intellectual
      Property rights of the Company.

     

    (iii) Except
      as
      set forth on Schedule
      2.1(r)(iii),
      (A) the
      Company owns all right, title and interest in, or has a valid and binding
      license to use, the material Intellectual Property, and, to the extent required
      in connection with the way in which Company has conducted, conducts, or
      presently proposes to conduct its business, to make, have made, use, sell,
      import and export, distribute, publicly perform, publicly display, reproduce
      and
      prepare derivative works of the Intellectual Property; (B) the rights of Company
      to the material Intellectual Property are free and clear of all Liens; (C)
      all
      registrations with and applications to governmental or regulatory bodies in
      respect of the Company-owned Intellectual Property are valid and in full force
      and effect and Company has taken all action required to maintain their validity
      and effectiveness; (D) there are no restrictions on the direct or indirect
      (i)
      transfer of any license, or any interest therein, held by the Company in respect
      of the material Intellectual

    

    
      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

    

    

    Property
      or (ii) change of control of the Company; (E) the Company has delivered to
      Purchasers prior to the execution of this Agreement documentation with respect
      to any invention, process, design, computer program or other know-how or trade
      secret included in the Intellectual Property, which documentation is accurate
      in
      all material respects and reasonably sufficient in detail and content to
      identify and explain such invention, process, design, computer program or other
      know-how or trade secret and to facilitate its use without reliance on the
      special knowledge or memory of any person; (F) the Company has taken reasonable
      measures to protect the secrecy, confidentiality and value of its trade secrets;
      and (G) the Company is not, nor has it received any notice that it is, in
      default (or with the giving of notice or lapse of time or both, would be in
      default) under any license with respect to the material Intellectual
      Property.

     

    (iv) Except
      as
      identified on Schedule
      2.1(r)(iv)
      or such
      approval or consents the absence of which would not have a Material Adverse
      Effect, no approval or consent of any person is needed so that the interest
      of
      the Company in the Intellectual Property shall continue to be in full force
      and
      effect following the transactions contemplated by this Agreement, and the
      Company is not subject to any restriction, agreement, instrument, order,
      judgment or decree which would be violated or breached by the consummation
      of
      the transactions contemplated by this Agreement.

     

    (v) Except
      for the fees identified in Schedule
      2.1(r)(v)-1
      for the
      agreements identified therein, no material licensing fees, royalties or payments
      are due or payable by the Company in connection with the Intellectual Property,
      other than maintenance fees. Schedule
      2.1(r)(v)-2
      separately lists and identifies all of Company's material maintenance fee
      obligations.

     

    (vi) Schedule
      2.1(r)(vi)
      separately lists and identifies all (A) computer programs, (B) computer
      databases (including, but not limited to, databases used in conjunction with
      such computer programs) and (C) documentation, specifications, manuals and
      materials associated therewith, owned, licensed or used by the Company,
      excluding generally available off-the-shelf microcomputer and work station
      software (collectively, the "Software
      Rights").
      Except as set forth in Schedule
      2.1(r)(vi),
      all
      right, title and interest in and to the Software (as hereinafter defined) is
      owned by the Company free and clear of all Liens and no party other than the
      Company has any interest in the Software. Each of the representations in
Sections
      2.1(r)(ii)
      through
(v),
      above,
      is applicable to the Software Rights.

     

    (vii) The
      computer software included in the Software Rights (the "Software")
      performs in accordance with the documentation and other written materials
      related to the Software and is free from substantial defects in programming
      and
      operations, is in machine readable form, contains all current revisions of
      such
      Software, and includes all computer programs, materials, tapes, know-how, object
      and source codes, other written materials, know-how and processes related to
      the
      Software.

     

    (viii) The
      Company has kept secret and has not disclosed the source code for the Software
      to any person or entity other than certain employees or independent contractors
      of the Company who are subject to the terms of a binding confidentiality
      agreement with respect thereto. The Company has taken all appropriate measures
      to protect the confidentiality and proprietary nature of the Software, including
      without limitation, the use of the

    

    
      
        
          
          

        

        
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    confidentiality
      agreements with all of its employees or independent contractors having access
      to
      the Software source and object code.

     

    (ix) None
      of
      the proprietary source software of the Company or its subsidiaries includes
      or
      incorporates any open source software that is licensed under the General Public
      License or another open source code license that requires the Company or its
      subsidiaries to release any portion of its source code, or to permit free
      distribution, reverse engineering or modification of any of its source
      code.

     

    (x) To
      the
      Company's knowledge, no employee of the Company is in default under, and the
      consummation of the transactions contemplated by this Agreement will not result
      in a default of, any term of any employment contract, agreement or arrangement
      relating to the Software or any noncompetition arrangement, or any other
      agreement or any restrictive covenant relating to the Software or its
      development or exploitation. The Company does not have any obligation to
      compensate any person for the development, use, sale or exploitation of the
      Software nor has the Company granted to any other person or entity any license,
      option or other rights to develop, use, sell or exploit in any manner the
      Software whether requiring the payment of royalties or not.

     

    (xi) All
      Intellectual Property owned by the Company and for which confidentiality is
      appropriate has been maintained in confidence in accordance with protection
      procedures believed by the Company to be adequate for protection customarily
      used in the industry to protect rights of like importance. All former and
      current managers, employees, agents, consultants and independent contractors
      who
      have authored, co-authored or otherwise contributed to or participated in any
      material way in the conception and development of Intellectual Property which
      is
      used in and material to the Company's business ("IP
      Participant"),
      have
      executed and delivered to the Company a proprietary information agreement,
      pursuant to which, among other things, such IP Participant has assigned any
      and
      all of his or her rights in such Intellectual Property to the Company and has
      agreed to keep such Intellectual Property confidential and not to use such
      Intellectual Property for any purpose unrelated to his or her work for the
      Company. No former or current IP Participant has filed, asserted in writing
      or,
      to the knowledge of the Company (or management employees of the Company with
      direct responsibility for Intellectual Property matters), threatened any claim
      against the Company in connection with his or her involvement in Intellectual
      Property which is used in and material to the Company's business. To the
      knowledge of the Company (or management employees of the Company with direct
      responsibility for Intellectual Property matters), no IP Participant has any
      patents issued or applications pending for any device, process, design or
      invention of any kind now used or needed by the Company which patents or
      applications have not been assigned to the Company.

     

    (xii) No
      former
      or current stockholder, director or officer, employee or independent contractor
      of the Company has any right to receive royalty payments or license fees from
      the Company.

     

    (xiii) With
      respect to privacy and security agreements and contractual commitments (the
      "Commitments"),
      (A)
      the Company is in full compliance with all applicable Commitments; (B) the
      transactions contemplated by this Agreement and the Transaction

    

    
      
        
          
          

        

        
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    Documents
      will not violate any Commitments; (C) the Company has not received inquiries
      from the Federal Trade Commission or any other federal or state governmental
      agencies regarding Commitments; (D) the Company has not received any written
      (including email) complaints from any web site user regarding Commitments,
      or
      compliance with Commitments; (E) the Commitments have not been rejected by
      any
      applicable certification organization which has reviewed such Commitment or
      to
      which any such Commitment has been submitted and (F) the Company has not
      experienced the cancellation, termination or revocation of any privacy or
      security certification issued by any Commitments.

     

    (xiv) The
      Company has in its possession or control: (A) correct and complete,
      fully-executed copies of all of the licenses and agreements (as amended to
      date)
      that are required to be identified on Schedules
      2.1(r);
      and (B)
      correct and complete copies of all documents (including without limitation
      patents, registration certificates, renewal certificates, applications,
      prosecution histories, and all documents submitted to or received from the
      relevant patent, copyright, trademark, domain name or other authorities in
      the
      United States and foreign jurisdictions, as the case may be) relating to each
      item of the Intellectual Property identified on Schedules
      2.1(r).
      The
      Company has delivered to Purchasers correct and complete, fully-executed copies
      of all of the documents described in this subsection.

     

    (s) Environmental
      Compliance.
      The
      Company and each of its subsidiaries have obtained all material approvals,
      authorization, certificates, consents, licenses, orders and permits or other
      similar authorizations of all governmental authorities, or from any other
      person, that are required under any Environmental Laws. "Environmental
      Laws"
      shall
      mean all applicable laws relating to the protection of the environment
      including, without limitation, all requirements pertaining to reporting,
      licensing, permitting, controlling, investigating or remediating emissions,
      discharges, releases or threatened releases of hazardous substances, chemical
      substances, pollutants, contaminants or toxic substances, materials or wastes,
      whether solid, liquid or gaseous in nature, into the air, surface water,
      groundwater or land, or relating to the manufacture, processing, distribution,
      use, treatment, storage, disposal, transport or handling of hazardous
      substances, chemical substances, pollutants, contaminants or toxic substances,
      material or wastes, whether solid, liquid or gaseous in nature. The Company
      has
      all necessary governmental approvals required under all Environmental Laws
      and
      used in its business or in the business of any of its subsidiaries. The Company
      and each of its subsidiaries are also in compliance with all other limitations,
      restrictions, conditions, standards, requirements, schedules and timetables
      required or imposed under all Environmental Laws. Except for such instances
      as
      would not individually or in the aggregate have a Material Adverse Effect,
      there
      are no past or present events, conditions, circumstances, incidents, actions
      or
      omissions relating to or in any way affecting the Company or its subsidiaries
      that violate or may violate any Environmental Law after the Closing Date or
      that
      may give rise to any environmental liability, or otherwise form the basis of
      any
      claim, action, demand, suit, proceeding, hearing, study or investigation (i)
      under any Environmental Law, or (ii) based on or related to the manufacture,
      processing, distribution, use, treatment, storage (including without limitation
      underground storage tanks), disposal, transport or handling, or the emission,
      discharge, release or threatened release of any hazardous
      substance.

     

    (t) Books
      and Records Internal Accounting Controls.
      The
      books and records of the Company and its subsidiaries accurately reflect in
      all
      material respects the information

    

    
      
        
          
          

        

        
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    relating
      to the business of the Company and the subsidiaries, the location and collection
      of their assets, and the nature of all transactions giving rise to the
      obligations or accounts receivable of the Company or any subsidiary. The Company
      and each of its subsidiaries maintain a system of internal accounting controls
      sufficient, in the judgment of the Company, to provide reasonable assurance
      that
      (i) transactions are executed in accordance with management's general or
      specific authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with GAAP and to maintain
      asset accountability, (iii) access to assets is permitted only in accordance
      with management's general or specific authorization and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate actions is taken with respect to any
      differences.

     

    (u) Material
      Agreements.
      Except
      for the Transaction Documents (with respect to clause (i) only) or as set forth
      on Schedule
      2.1(u)
      hereto,
      (i) the Company and each of its subsidiaries have performed all obligations
      required to be performed by them to date under any written or oral contract,
      instrument, agreement, commitment, obligation, plan or arrangement, filed or
      required to be filed with the Commission (the "Material
      Agreements"),
      (ii)
      neither the Company nor any of its subsidiaries has received any notice of
      default under any Material Agreement and (iii) to the Company's knowledge
      neither the Company nor any of its subsidiaries is in default under any Material
      Agreement and
      (iv)
      neither this Agreement nor the transactions contemplated hereby will give any
      party to the Material Agreements any right to terminate or modify the Material
      Agreements.

     

    (v) Transactions
      with Affiliates.
      Except
      as set forth on Schedule
      2.1(v)
      hereto,
      there are no loans, leases, agreements, contracts, royalty agreements,
      management contracts or arrangements or other continuing transactions between
      (a) the Company or any subsidiary on the one hand, and (b) on the other hand,
      any officer, employee, consultant or director of the Company, or any of its
      subsidiaries, or any person owning any capital stock of the Company or any
      subsidiary or any member of the immediate family of such officer, employee,
      consultant, director or stockholder or any corporation or other entity
      controlled by such officer, employee, consultant, director or stockholder,
      or a
      member of the immediate family of such officer, employee, consultant, director
      or stockholder.

     

    (w) Securities
      Act of 1933.
      Based
      in part upon the representations herein of the Purchasers, the Company has
      complied and will comply with all applicable federal and state securities laws
      in connection with the offer, issuance and sale of the Shares and the Warrants
      hereunder. Neither the Company nor anyone acting on its behalf, directly or
      indirectly, has or will sell, offer to sell or solicit offers to buy any of
      the
      Shares, the Warrants or similar securities to, or solicit offers with respect
      thereto from, or enter into any preliminary conversations or negotiations
      relating thereto with, any person, or has taken or will take any action so
      as to
      bring the issuance and sale of any of the Shares and the Warrants under the
      registration provisions of the Securities Act and applicable state securities
      laws, and neither the Company nor any of its affiliates, nor any person acting
      on its or their behalf, has engaged in any form of general solicitation or
      general advertising (within the meaning of Regulation D under the Securities
      Act) in connection with the offer or sale of any of the Shares and the
      Warrants.

    

    
      
        
          
          

        

        
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    (x) Governmental
      Approvals.
      Except
      for the filing of any notice prior or subsequent to the Closing Date that may
      be
      required under applicable state and/or Federal securities laws (which if
      required, shall be filed on a timely basis), including the filing of a Form
      D
      and a registration statement or statements pursuant to the Registration Rights
      Agreement, and the filing of the Certificate of Designation with the Secretary
      of State for the State of Delaware, no authorization, consent, approval,
      license, exemption of, filing or registration with any court or governmental
      department, commission, board, bureau, agency or instrumentality, domestic
      or
      foreign, is or will be necessary for, or in connection with, the execution
      or
      delivery of the Preferred Shares and the Warrants, or for the performance by
      the
      Company of its obligations under the Transaction Documents.

     

    (y) Employees.
      Neither
      the Company nor any subsidiary has any collective bargaining arrangements or
      agreements covering any of its employees or employs any member of a union.
      The
      Company and its subsidiaries believe that their relations with their employees
      are satisfactory. No executive officer of the Company (as defined in Rule 501(f)
      of the Securities Act) has notified the Company that such officer intends to
      leave the Company or otherwise terminate such officer's employment with the
      Company. No executive officer of the Company, to the knowledge of the Company,
      is, or is now expected to be, in violation of any material term of any
      employment contract, confidentiality, disclosure or proprietary information
      agreement, non-competition agreement, or any other contract or agreement or
      any
      restrictive covenant, and the continued employment of each such executive
      officer does not subject the Company or any of its subsidiaries to any liability
      with respect to any of the foregoing matters.

     

    (z) Absence
      of Certain Developments.
      Except
      as set forth on Schedule
      2.1(z)
      hereto,
      since the Audited Financial Statements Date, neither the Company nor any
      subsidiary has:

     

    (i) issued
      any stock, bonds or other corporate securities or any rights, options or
      warrants with respect thereto;

     

    (ii) borrowed
      any amount or incurred or become subject to any liabilities (absolute or
      contingent) except current liabilities incurred in the ordinary course of
      business which are comparable in nature and amount to the current liabilities
      incurred in the ordinary course of business during the comparable portion of
      its
      prior fiscal year, as adjusted to reflect the current nature and volume of
      the
      Company's or such subsidiary's business;

     

    (iii) discharged
      or satisfied any lien or encumbrance or paid any obligation or liability
      (absolute or contingent), other than current liabilities paid in the ordinary
      course of business;

     

    (iv) declared
      or made any payment or distribution of cash or other property to stockholders
      with respect to its stock, or purchased or redeemed, or made any agreements
      so
      to purchase or redeem, any shares of its capital stock;

     

    (v) sold,
      assigned or transferred any other tangible assets, or canceled any debts or
      claims, except in the ordinary course of business;

     

    

    
      
        
          
          

        

        
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    (vi) sold,
      assigned or transferred any patent rights, trademarks, trade names, copyrights,
      trade secrets or other intangible assets or intellectual property rights, or
      disclosed any proprietary confidential information to any person except to
      customers in the ordinary course of business or to the Purchasers or their
      representatives;

     

    (vii) suffered
      any material losses or waived any rights of material value, whether or not
      in
      the ordinary course of business, or suffered the loss of any material amount
      of
      prospective business;

     

    (viii) made
      any
      changes in employee compensation except in the ordinary course of business
      and
      consistent with past practices;

     

    (ix) made
      capital expenditures or commitments therefor that aggregate in excess of
      $50,000;

     

    (x) entered
      into any other transaction other than in the ordinary course of business, or
      entered into any other material transaction, whether or not in the ordinary
      course of business;

     

    (xi) made
      charitable contributions or pledges in excess of $10,000;

     

    (xii) suffered
      any material damage, destruction or casualty loss, whether or not covered by
      insurance;

     

    (xiii) experienced
      any material problems with labor or management in connection with the terms
      and
      conditions of their employment;

     

    (xiv) effected
      any two or more events of the foregoing kind which in the aggregate would be
      material to the Company or its subsidiaries; or

     

    (xv) entered
      into an agreement, written or otherwise, to take any of the foregoing
      actions.

     

    (aa) Investment
      Company Act Status.
      The
      Company is not, and as a result of and immediately upon the Closing will not
      be,
      an "investment company" or a company "controlled" by an "investment company,"
      within the meaning of the Investment Company Act of 1940, as
      amended.

     

    (bb) ERISA.
      No
      liability to the Pension Benefit Guaranty Corporation has been incurred with
      respect to any Plan (as defined below) by the Company or any of its subsidiaries
      which is or would be materially adverse to the Company and its subsidiaries.
      The
      execution and delivery of this Agreement and the issuance and sale of the
      Preferred Shares will not involve any transaction which is a "prohibited
      transaction" under Section 406 of the Employee Retirement Income Security Act
      of
      1974, as amended ("ERISA")
      or in
      connection with which an excise tax could be imposed pursuant to Section 4975
      of
      the Internal Revenue Code of 1986, as amended (the "Code"),
      provided that, if any of the Purchasers, or any person or entity that owns
      a
      beneficial interest in any of the Purchasers, is an "employee pension benefit
      plan" (within the meaning of Section 3(2) of ERISA) with respect to which the
      Company is a

    

    
      
        
          
          

        

        
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    "party
      in
      interest" (within the meaning of Section 3(14) of ERISA), the requirements
      of
      Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. No Plan is
      subject to Title IV of ERISA or the minimum funding requirements of Code Section
      412. As used in this Section 2.1(bb), the term "Plan"
      shall
      mean an "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
      which is or has been established or maintained, or to which contributions are
      or
      have been made, by the Company or any subsidiary or by any trade or business,
      whether or not incorporated, which, together with the Company or any subsidiary,
      is treated as a single employer, as described in Code Section 414(b), (c),
      (m)
      or (o).

     

    (cc) Dilutive
      Effect.
      The
      Company understands and acknowledges that its obligation to issue Conversion
      Shares upon conversion of the Preferred Shares in accordance with this Agreement
      and the Certificate of Designation and its obligations to issue the Warrant
      Shares upon the exercise of the Warrants in accordance with this Agreement
      and
      the Warrants, is, in each case, absolute and unconditional regardless of the
      dilutive effect that such issuance may have on the ownership interest of
      other
      stockholders of the Company.

     

    (dd) No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would cause
      the offering of the Shares pursuant to this Agreement to be integrated with
      prior offerings by the Company for purposes of the Securities Act which would
      prevent the Company from selling the Shares pursuant to Rule 506 under the
      Securities Act, or any applicable exchange-related stockholder approval
      provisions, nor will the Company or any of its affiliates or subsidiaries take
      any action or steps that would cause the offering of the Shares to be integrated
      with other offerings.
      The
      Company does not have any registration statement pending before the Commission
      or currently under the Commission's review and since July
      1,
      2006, the Company has not offered or sold any of its equity securities or debt
      securities convertible into shares of Common Stock.

     

    (ee) Sarbanes-Oxley
      Act.
      The
      Company is in compliance with the applicable provisions of the Sarbanes-Oxley
      Act of 2002 (the "Sarbanes-Oxley
      Act"),
      and
      the rules and regulations promulgated thereunder, that are effective, and
      intends to comply with other applicable provisions of the Sarbanes-Oxley Act,
      and the rules and regulations promulgated thereunder, upon the effectiveness
      of
      such provisions.

     

    (ff) Transfer
      Agent.
      The
      name, address, telephone number, fax number, contact person and email address
      of
      the Company's transfer agent is set forth on Schedule
      2.1(ff)
      hereto.

     

    (gg) Independent
      Nature of Purchasers.
      The
      Company acknowledges that the obligations of each Purchaser under the
      Transaction Documents are several and not joint with the obligations of any
      other Purchaser, and no Purchaser shall be responsible in any way for the
      performance of the obligations of any other Purchaser under the Transaction
      Documents. The Company acknowledges that the decision of each Purchaser to
      purchase securities pursuant to this Agreement has been made by such Purchaser
      independently of any other purchase and independently of any information,
      materials, statements or opinions as to the business, affairs, operations,
      assets, properties, liabilities, results of operations, condition (financial
      or
      otherwise)

    

    
      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

    

    

    or
      prospects of the Company or of its Subsidiaries which may have made or given
      by
      any other Purchaser or by any agent or employee of any other Purchaser, and
      no
      Purchaser or any of its agents or employees shall have any liability to any
      Purchaser (or any other person) relating to or arising from any such
      information, materials, statements or opinions. The Company acknowledges that
      nothing contained herein, or in any Transaction Document, and no action taken
      by
      any Purchaser pursuant hereto or thereto, shall be deemed to constitute the
      Purchasers as a partnership, an association, a joint venture or any other kind
      of entity, or create a presumption that the Purchasers are in any way acting
      in
      concert or as a group with respect to such obligations or the transactions
      contemplated by the Transaction Documents. The Company acknowledges that each
      Purchaser shall be entitled to independently protect and enforce its rights,
      including without limitation, the rights arising out of this Agreement or out
      of
      the other Transaction Documents, and it shall not be necessary for any other
      Purchaser to be joined as an additional party in any proceeding for such
      purpose. The Company acknowledges that for reasons of administrative convenience
      only, the Transaction Documents have been prepared by counsel for one of the
      Purchasers and such counsel does not represent all of the Purchasers but only
      such Purchaser and the other Purchasers have retained their own individual
      counsel with respect to the transactions contemplated hereby.  The Company
      acknowledges that it has elected to provide all Purchasers with the same terms
      and Transaction Documents for the convenience of the Company and not because
      it
      was required or requested to do so by the Purchasers. The Company acknowledges
      that such procedure with respect to the Transaction Documents in no way creates
      a presumption that the Purchasers are in any way acting in concert or as a
      group
      with respect to the Transaction Documents or the transactions contemplated
      hereby or thereby.

     

    (hh) No
      General Solicitation; Placement Agent's Fees.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has engaged in any form of general solicitation or general advertising
      (within the meaning of Regulation D) in connection with the offer or sale of
      the
      Shares. The Company shall be responsible for the payment of any placement
      agent's fees, financial advisory fees, or brokers' commissions (other than
      for
      persons engaged by any Purchaser or its investment advisor) relating to or
      arising out of the transactions contemplated hereby. The Company shall pay,
      and
      hold each Purchaser harmless against, any liability, loss or expense (including,
      without limitation, reasonable attorney's fees and out-of-pocket expenses)
      arising in connection with any such claim. The Company acknowledges that it
      has
      engaged C.E. Unterberg, Towbin as placement agent (together the "Agent")
      in
      connection with the sale of the Shares. Other than the Agent, the Company has
      not engaged any placement agent or other agent in connection with the sale
      of
      the Shares.

     

    (ii) Intentionally
      Omitted.

     

    (jj) Insurance.
      The
      Company and each of its subsidiaries are insured by insurers of recognized
      financial responsibility against such losses and risks and in such amounts
      as
      management of the Company believes to be prudent and customary in the businesses
      in which the Company and its subsidiaries are engaged. Neither the Company
      nor
      any such subsidiary has been refused any insurance coverage sought or applied
      for and neither the Company nor any such subsidiary has any reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar
      insurers

     

    

    
      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

    

    

    as
      may be
      necessary to continue its business at a cost that would not have a Material
      Adverse Effect.

     

    (kk) Foreign
      Corrupt Practices.
      Neither
      the Company, nor any of its subsidiaries, nor any director, officer, agent,
      employee or other person acting on behalf of the Company or any of its
      subsidiaries has, in the course of its actions for, or on behalf of, the Company
      (i) used any corporate funds for any unlawful contribution, gift,
      entertainment or other unlawful expenses relating to political activity;
      (ii) made any direct or indirect unlawful payment to any foreign or
      domestic government official or employee from corporate funds;
      (iii) violated or is in violation of any provision of the U.S. Foreign
      Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
      rebate, payoff, influence payment, kickback or other unlawful payment to any
      foreign or domestic government official or employee.

     

    (ll) Stockholders'
      Equity.
      The
      Company acknowledges that (a) as a material inducement and consideration for
      the
      Purchasers to enter into the Transaction Documents and to purchase the Preferred
      Shares, the Company has agreed to the Acquisition Failure Redemption (as defined
      in Section 3.11(b)) mechanism, and (b) as of the Closing Date, the Company’s
      capital is not impaired to the extent that the Company has total stockholders’
equity of no less than $1,000,000.

     

    2.2 Representations
      and Warranties of the Purchasers.
      Each of
      the Purchasers hereby makes the following representations and warranties to
      the
      Company with respect solely to itself and not with respect to any other
      Purchaser:

     

    (a) Incorporation
      and Standing of the Purchasers.
      If the
      Purchaser is an entity, such Purchaser is a corporation, limited liability
      company or partnership duly incorporated, validly existing and in good standing
      under the laws of the jurisdiction of its incorporation.

     

    (b) Authorization
      and Power.
      Each
      Purchaser has the requisite power and authority to enter into and perform this
      Agreement and to purchase the Preferred Shares and Warrants being sold to it
      hereunder. The execution, delivery and performance of this Agreement and the
      Registration Rights Agreement by such Purchaser and the consummation by it
      of
      the transactions contemplated hereby and thereby have been duly authorized
      by
      all necessary corporate or partnership action, and no further consent or
      authorization of such Purchaser or its Board of Directors, stockholders, or
      partners, as the case may be, is required. Each of this Agreement and the
      Registration Rights Agreement has been duly authorized, executed and delivered
      by such Purchaser and constitutes, or shall constitute when executed and
      delivered, a valid and binding obligation of the Purchaser enforceable against
      the Purchaser in accordance with the terms thereof.

     

    (c) No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the Registration
      Rights Agreement and the consummation by such Purchaser of the transactions
      contemplated hereby and thereby or relating hereto do not and will not (i)
      result in a violation of such Purchaser's charter documents or bylaws or other
      organizational documents or (ii) conflict with, or constitute a default (or
      an
      event which with notice or lapse of time or both

    

    
      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

    

    

    would
      become a default) under, or give to others any rights of termination, amendment,
      acceleration or cancellation of any agreement, indenture or instrument or
      obligation to which such Purchaser is a party or by which its properties or
      assets are bound, or result in a violation of any law, rule, or regulation,
      or
      any order, judgment or decree of any court or governmental agency applicable
      to
      such Purchaser or its properties (except for such conflicts, defaults and
      violations as would not, individually or in the aggregate, have a Material
      Adverse Effect on such Purchaser). Such Purchaser is not required to obtain
      any
      consent, authorization or order of, or make any filing or registration with,
      any
      court or governmental agency in order for it to execute, deliver or perform
      any
      of its obligations under this Agreement or the Registration Rights Agreement
      or
      to purchase the Preferred Shares or acquire the Warrants in accordance with
      the
      terms hereof, provided that for purposes of the representation made in this
      sentence, such Purchaser is assuming and relying upon the accuracy of the
      relevant representations and agreements of the Company herein.

     

    (d) Acquisition
      for Investment.
      Each
      Purchaser is acquiring the Preferred Shares and the Warrants solely for its
      own
      account for the purpose of investment and not with a view to or for sale in
      connection with distribution. Each Purchaser does not have a present intention
      to sell the Preferred Shares or the Warrants, nor a present arrangement (whether
      or not legally binding) or intention to effect any distribution of the Preferred
      Shares or the Warrants to or through any person or entity; provided,
      however,
      that by
      making the representations herein and subject to Sections 2.2(h) and (k) below,
      such Purchaser does not agree to hold the Shares or the Warrants for any minimum
      or other specific term and reserves the right to dispose of the Shares or the
      Warrants at any time in accordance with Federal and state securities laws
      applicable to such disposition. Each Purchaser acknowledges that it is able
      to
      bear the financial risks associated with an investment in the Preferred Shares
      and the Warrants and that it has been given full access to such records of
      the
      Company and the subsidiaries and to the officers of the Company and the
      subsidiaries and received such information as it has deemed necessary or
      appropriate to conduct its due diligence investigation and has sufficient
      knowledge and experience in investing in companies similar to the Company in
      terms of the Company's stage of development so as to be able to evaluate the
      risks and merits of its investment in the Company.

     

    (e) Status
      of Purchasers.
      Each
      Purchaser is an "accredited investor" as defined in Rule 501(a) promulgated
      under the Securities Act. Each Purchaser has knowledge and experience in
      financial and business matters as to be capable of evaluating the merits and
      risks of purchasing the Shares. Such Purchaser is not required to be registered
      as a broker-dealer under Section 15 of the Exchange Act and such Purchaser
      is
      not a broker-dealer.

     

    (f) Opportunities
      for Additional Information.
      Each
      Purchaser acknowledges that such Purchaser has had the opportunity to ask
      questions of and receive answers from, or obtain additional information from,
      the executive officers of the Company concerning the financial and other affairs
      of the Company, and to the extent deemed necessary in light of such Purchaser's
      personal knowledge of the Company's affairs, such Purchaser has asked such
      questions and received answers to the full satisfaction of such Purchaser,
      and
      such Purchaser desires to invest in the Company.

     

    (g) No
      General Solicitation.
      Each
      Purchaser acknowledges that the Preferred Shares and the Warrants were not
      offered to such Purchaser by means of any form of general or

    

    
      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

    

    

    public
      solicitation or general advertising, or publicly disseminated advertisements
      or
      sales literature, including (i) any advertisement, article, notice or other
      communication published in any newspaper, magazine, or similar media, or
      broadcast over television or radio, or (ii) any seminar or meeting to which
      such
      Purchaser was invited by any of the foregoing means of
      communications.

     

    (h) Rule
      144.
      Such
      Purchaser understands that the Shares must be held indefinitely unless such
      Shares are registered under the Securities Act or an exemption from registration
      is available. Such Purchaser acknowledges that such Purchaser is familiar with
      Rule 144 of the rules and regulations of the Commission, as amended, promulgated
      pursuant to the Securities Act ("Rule
      144"),
      and
      that such person has been advised that Rule 144 permits resales only under
      certain circumstances. Such Purchaser understands that to the extent that Rule
      144 is not available, such Purchaser will be unable to sell any Shares without
      either registration under the Securities Act or the existence of another
      exemption from such registration requirement.

     

    (i) General.
      Such
      Purchaser understands that the Shares are being offered and sold in reliance
      on
      a transactional exemption from the registration requirement of Federal and
      state
      securities laws and the Company is relying upon the truth and accuracy of the
      representations, warranties, agreements, acknowledgments and understandings
      of
      such Purchaser set forth herein in order to determine the applicability of
      such
      exemptions and the suitability of such Purchaser to acquire the
      Shares.

     

    (j) Independent
      Investment.
      Except
      as may be disclosed in any filings with the Commission by the Purchasers under
      Section 13 and/or Section 16 of the Exchange Act, no Purchaser has agreed to
      act
      with any other Purchaser for the purpose of acquiring, holding, voting or
      disposing of the Shares purchased hereunder for purposes of Section 13(d) under
      the Exchange Act, and each Purchaser is acting independently with respect to
      its
      investment in the Shares.

     

    (k) Trading
      Activities; No
      Short Sales.
      Each
      Purchaser's trading activities with respect to the Shares shall be in compliance
      with all applicable federal and state securities laws. No
      Purchaser nor any of its affiliates has an open short position in the Common
      Stock. . Each Purchaser, whether in their own capacity or through a
      representative, agent or affiliate agrees that it will not enter into or effect
      any "short sales" (as such term is defined in Rule 3b-3 of the Exchange Act)
      of
      the Shares or the Warrant Shares or any hedging transaction, including obtaining
      borrow, which establishes a net short position with respect to the Shares or
      the
      Warrant Shares, whether on a U.S. domestic exchange or any foreign exchange.
      Additionally, each Purchaser further agrees that it shall not, and that it
      will
      cause its affiliates not to, engage in any short sales with respect to the
      Common Stock.

     

    ARTICLE
      III

     

    COVENANTS

     

    The
      Company covenants with each of the Purchasers as follows, which covenants are
      for the benefit of the Purchasers and their permitted assignees (as defined
      herein).

     

    

    
      
        
          
          

        

        
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    3.1 Securities
      Compliance.
      The
      Company shall notify the Commission in accordance with their rules and
      regulations, of the transactions contemplated by any of the Transaction
      Documents, including filing a Form D with respect to the Preferred Shares,
      Warrants, Conversion Shares and Warrant Shares as required under Regulation
      D,
      and shall take all other necessary action and proceedings as may be required
      and
      permitted by applicable law, rule and regulation, for the legal and valid
      issuance of the Preferred Shares, the Warrants, the Conversion Shares and the
      Warrant Shares to the Purchasers or subsequent holders.

     

    3.2 Registration
      and Listing.
      The
      Company shall cause its Common Stock to be registered under Sections 12(b)
      or
      12(g) of the Exchange Act no later than the effective date of the Registration
      Statement (as defined in the Registration Rights Agreement), to comply in all
      respects with its reporting and filing obligations under the Exchange Act,
      to
      comply with all requirements related to any registration statement to be filed
      pursuant to this Agreement or the Registration Rights Agreement, and not to
      take
      any action or file any document (whether or not permitted by the Securities
      Act
      or the rules promulgated thereunder) to terminate or suspend such registration
      or to terminate or suspend its reporting and filing obligations under the
      Exchange Act or Securities Act, except as permitted herein. Subject to the
      terms
      of the Transaction Documents, the Company further covenants that it will take
      such further action as the Purchasers may reasonably request, all to the extent
      required from time to time to enable the Purchasers to sell the Shares without
      registration under the Securities Act within the limitation of the exemptions
      provided by Rule 144 promulgated under the Securities Act. Upon the request
      of
      the Purchasers, the Company shall deliver to the Purchasers a written
      certification of a duly authorized officer as to whether it has complied with
      such requirements.

     

    3.3 Inspection
      Rights.
      The
      Company shall permit, during normal business hours and upon reasonable request
      and reasonable notice, each Purchaser or any employees, agents or
      representatives thereof, so long as such Purchaser shall be obligated hereunder
      to purchase the Preferred Shares or shall beneficially own any Preferred Shares,
      or shall own Conversion Shares which, in the aggregate, represent more than
      2%
      of the total combined voting power of all voting securities then outstanding,
      for purposes reasonably related to such Purchaser's interests as a stockholder
      to examine and make reasonable copies of and extracts from the records and
      books
      of account of, and visit and inspect the properties, assets, operations and
      business of the Company and any subsidiary, and to discuss the affairs, finances
      and accounts of the Company and any subsidiary with any of its officers,
      consultants, directors, and key employees.

     

    3.4 Compliance
      with Laws.
      The
      Company shall comply, and cause each subsidiary to comply, with all applicable
      laws, rules, regulations and orders, noncompliance with which could have a
      Material Adverse Effect.

     

    3.5 Keeping
      of Records and Books of Account.
      The
      Company shall keep and cause each subsidiary to keep adequate records and books
      of account, in which complete entries will be made in accordance with GAAP
      consistently applied, reflecting all financial transactions of the Company
      and
      its subsidiaries, and in which, for each fiscal year, all proper reserves for
      depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
      purposes in connection with its business shall be made.

     

    
      
        
        

      

      
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    3.6 Reporting
      Requirements.
      Following such time that the Company is required to become registered under
      the
      Exchange Act pursuant to the terms of this Agreement, if the Commission ceases
      making the Company's periodic reports available via the Internet without charge,
      then the Company shall, promptly after filing with the Commission, furnish
      the
      following to each Purchaser so long as such Purchaser shall be obligated
      hereunder to purchase the Securities or shall beneficially own Shares or Warrant
      Shares:

     

    (a) Quarterly
      Reports on Form 10-Q or Form 10-QSB filed with the Commission;

     

    (b) Annual
      Reports on Form 10-K or Form 10-KSB filed with the Commission; and

     

    (c) Copies
      of
      all notices, information and proxy statements in connection with any meetings
      that are, in each case, provided to holders of shares of Common Stock,
      contemporaneously with the delivery of such notices or information to such
      holders of Common Stock.

     

    3.7 Amendments.
      Except
      as otherwise provided herein, the Company shall not amend or waive any provision
      of the Certificate or Bylaws of the Company in any way that would adversely
      affect the liquidation preferences, dividends rights, conversion rights, voting
      rights or redemption rights of the Preferred Shares; provided,
      however,
      that
      any creation and issuance of another series of Junior Stock (as defined in
      the
      Certificate of Designation) or any other class or series of equity securities
      which by its terms shall rank on parity with the Preferred Shares shall not
      be
      deemed to materially and adversely affect such rights, preferences or
      privileges.

     

    3.8 Other
      Agreements.
      The
      Company shall not enter into any agreement in which the terms of such agreement
      would restrict or impair the right or ability to perform of the Company or
      any
      subsidiary under any Transaction Document.

     

    3.9 Distributions.
      So
      long
      as any Preferred Shares or Warrants remain outstanding, the Company agrees
      that
      it shall not (i) declare or pay any dividends or make any distributions to
      any
      holder(s) of Common Stock or Junior Stock (as defined in the Certificate of
      Designation and the J Warrant Shares Certificate of Designation) except for
      dividends or distributions on account of the Series A

    

    
      
        
          
          

        

        
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    Preferred
      Stock or Series C Preferred Stock, provided, that, neither (x) has any
      Triggering Event (as defined in the Certificate of Designation) occurred,
      whether or not any Purchasers elect to exercise any rights or redemption
      options, nor (y) is the Company in breach of any representation, warranty,
      covenant or other term or condition of this Agreement, the Transaction Documents
      or any other agreement, document, certificate or other instrument delivered
      in
      connection with the transactions contemplated thereby or hereby, or (ii)
      purchase or otherwise acquire for value, directly or indirectly, any Common
      Stock or other equity security of the Company.

     

    3.10 Status
      of Dividends.
      The
      Company covenants and agrees that (i) no Federal income tax return or claim
      for
      refund of Federal income tax or other submission to the Internal Revenue Service
      (the "Service")
      will
      adversely affect the Preferred Shares, any other series of its preferred stock,
      or the Common Stock, and no deduction shall operate to jeopardize the
      availability to Purchasers of the dividends received deduction provided by
      Section 243(a)(1) of the Code or any successor provision, (ii) in no report
      to
      stockholders or to any governmental body having jurisdiction over the Company
      or
      otherwise will it treat the Preferred Shares other than as equity capital or
      the
      dividends paid thereon other than as dividends paid on equity capital unless
      required to do so by a governmental body having jurisdiction over the accounts
      of the Company or by a change in generally accepted accounting principles
      required as a result of action by an authoritative accounting standards setting
      body, and (iii) it will take no action which would result in the dividends
      paid
      by the Company on the Preferred Shares out of the Company's current or
      accumulated earnings and profits being ineligible for the dividends received
      deduction provided by Section 243(a)(1) of the Code. The preceding sentence
      shall not be deemed to prevent the Company from designating the Preferred Stock
      as "Convertible Preferred Stock" in its annual and quarterly financial
      statements in accordance with its prior practice concerning other series of
      preferred stock of the Company. In the event that the Purchasers have reasonable
      cause to believe that dividends paid by the Company on the Preferred Shares
      out
      of the Company's current or accumulated earnings and profits will not be treated
      as eligible for the dividends received deduction provided by Section 243(a)(1)
      of the Code, or any successor provision, the Company will, at the reasonable
      request of the Purchasers of 51% of the outstanding Preferred Shares, join
      with
      the Purchasers in the submission to the Service of a request for a ruling that
      dividends paid on the Shares will be so eligible for Federal income tax
      purposes, at the Purchasers expense. In addition, the Company will reasonably
      cooperate with the Purchasers (at Purchasers' expense) in any litigation, appeal
      or other proceeding challenging or contesting any ruling, technical advice,
      finding or determination that earnings and profits are not eligible for the
      dividends received deduction provided by Section 243(a)(1) of the Code, or
      any
      successor provision to the extent that the position to be taken in any such
      litigation, appeal, or other proceeding is not contrary to any provision of
      the
      Code. Notwithstanding the foregoing, nothing herein contained shall be deemed
      to
      preclude the Company from claiming a deduction with respect to such dividends
      if
      (i) the Code shall hereafter be amended, or final Treasury regulations
      thereunder are issued or modified, to provide that dividends on the Preferred
      Shares or Conversion Shares should not be treated as dividends for Federal
      income tax purposes or that a deduction with respect to all or a portion of
      the
      dividends on the Shares is allowable for Federal income tax purposes, or (ii)
      in
      the absence of such an amendment, issuance or modification and after a
      submission of a request for ruling or

    

    
      
        
          
          

        

        
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    technical
      advice, the Service shall issue a published ruling or advise that dividends
      on
      the Shares should not be treated as dividends for Federal income tax purposes.
      If the Service specifically determines that the Preferred Shares or Conversion
      Shares constitute debt, the Company may file protective claims for refund.
      

     

    3.11 Use
      of
      Proceeds.

     

    (a) 
      The
      Company will use the net proceeds from the sale of the Shares hereunder solely
      for the acquisition of the entities listed on Schedule
      3.11
      (the
      "Scheduled
      Acquisitions"),
      general working capital and other subsequent acquisitions that have been
      approved by a majority of the outstanding Preferred Shares (the "Approved
      Acquisitions"
      and
      together with the Scheduled Acquisitions, the "Acquisitions",
      and
      each entity to be acquired in the Acquisitions, an "Approved
      Acquisition Target"),
      and
      not to (i) repay any other outstanding pari
      passu
      or
      junior Indebtedness of the Company; (ii) except as permitted pursuant to
      Section 3.9 of this Agreement in respect of the Series A Preferred Stock and
      the
      Series C Preferred Stock, apply to any stockholder or bridge loan; (iii) 
redeem or repurchase any of the Company's equity securities including any Common
      Stock or securities convertible, exercisable or exchangeable into Common Stock;
      (iv) settle any outstanding litigation in excess of $50,000; or
      (v) service any other debt or financing obligation of the Company, its
      subsidiaries or affiliates; provided, however, that the Permitted Indebtedness
      set forth on Schedule
      3.12
      shall
      cease to be permitted upon the occurrence and until the cure of a Triggering
      Event pursuant to Article
      VIII.

     

    (b) Acquisition
      Failure.
      The
      Company shall use at least $10,000,000 (the “Acquisition
      Funds”)
      of the
      net proceeds from the sale of the Shares to consummate and complete the
      Acquisitions. The Company shall have closed the Acquisitions with each of the
      Approved Acquisition Targets by not later than August 15, 2007 (the
“Acquisition
      Deadline”).
      The
      Acquisition Deadline may be extended through not later than December 1, 2007
      with the written consent of the Purchasers holding greater than 50% of the
      Preferred Shares. If fewer than all of the Acquisitions have been consummated
      by
      the Acquisition Deadline, then an “Acquisition
      Failure”
shall
      be deemed to have occurred. In the event of an Acquisition Failure, an amount
      of
      the Purchaser’s Preferred Shares equal to the Acquisition Failure Amount (as
      defined below) shall be redeemed in accordance with the terms of the Certificate
      of Designation in an “Acquisition
      Failure Redemption”
(as
      defined in the Certificate of Designation). In the event of an Acquisition
      Failure Redemption, a percentage of the number of Warrants initially issued
      to
      Purchaser hereunder equal to the Acquisition Failure Percentage (as defined
      below) shall automatically terminate and shall be returned to the Company by
      the
      Purchaser within five (5) business days of the Purchaser’s receipt of the
      Acquisition Failure Redemption Price (as defined in the Certificate of
      Designation). For purposes hereof, the “Acquisition
      Failure Percentage”
shall
      mean the number of shares of Preferred Stock that are redeemed by the Company
      in
      a completed Acquisition Failure Redemption (as defined in the Certificate of
      Designation), divided by the number of Preferred Shares initially purchased
      by
      the Purchaser hereunder, and the “Acquisition
      Failure Amount”
shall
      mean the difference of the initial amount of the Acquisition Funds and the
      amount of Acquisition Funds that the Company has paid directly to Approved
      Acquisition Targets for those Acquisitions that have been completed, consummated
      and closed, if any.

    

    
      
        
          
          

        

        
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    3.12 Indebtedness.
      Except
      as permitted on Schedule
      3.12
      (the
      "Permitted
      Indebtedness")
      and
      except as listed on Schedule
      2.1(k),
      the
      Company will not enter into, create, incur, assume, guarantee or suffer to
      exist
      any Indebtedness.

     

    3.13 Reservation
      of Shares.
      So long
      as any of the Preferred Shares or Warrants remain outstanding, the Company
      shall
      take all action necessary to at all times have authorized, and reserved for
      the
      purpose of issuance, no less than one hundred twenty percent (120%) the
      aggregate number of shares of Common Stock needed to provide for the issuance
      of
      the Conversion Shares and the Warrant Shares.

     

    3.14 Transfer
      Agent Instructions.
      The
      Company shall issue irrevocable instructions to its transfer agent, and any
      subsequent transfer agent, to issue certificates, registered in the name of
      each
      Purchaser or its respective nominee(s), for the Conversion Shares and the
      Warrant Shares in such amounts as specified from time to time by each Purchaser
      to the Company upon conversion of the Preferred Shares or exercise of the
      Warrants in the form of Exhibit
      G
      attached
      hereto (the "Irrevocable
      Transfer Agent Instructions").
      Prior
      to registration of the Conversion Shares and the Warrant Shares under the
      Securities Act, all such certificates shall bear the restrictive legend
      specified in Section 5.1 of this Agreement. The Company warrants that no
      instruction other than the Irrevocable Transfer Agent Instructions referred
      to
      in this Section 3.14 will be given by the Company to its transfer agent and
      that
      the Shares shall otherwise be freely transferable on the books and records
      of
      the Company as and to the extent provided in this Agreement and the Registration
      Rights Agreement. If a Purchaser provides the Company with an opinion of
      counsel, in a generally acceptable form, to the effect that a public sale,
      assignment or transfer of the Shares may be made without registration under
      the
      Securities Act or the Purchaser provides the Company with reasonable assurances
      that the Shares can be sold pursuant to Rule 144 without any restriction as
      to
      the number of securities acquired as of a particular date that can then be
      immediately sold, the Company shall permit the transfer, and, in the case of
      the
      Conversion Shares and the Warrant Shares, promptly instruct its transfer agent
      to issue one or more certificates in such name and in such denominations as
      specified by such Purchaser and without any restrictive legend. The Company
      acknowledges that a breach by it of its obligations under this Section 3.14
      will
      cause irreparable harm to the Purchasers by vitiating the intent and purpose
      of
      the transaction contemplated hereby. Accordingly, the Company acknowledges
      that
      the remedy at law for a breach of its obligations under this Section 3.14
      will be inadequate and agrees, in the event of a breach or threatened breach
      by
      the Company of the provisions of this Section 3.14, that the Purchasers shall
      be
      entitled, in addition to all other available remedies, to an order and/or
      injunction restraining any breach and requiring immediate issuance and transfer,
      without the necessity of showing economic loss and without any bond or other
      security being required.

     

    3.15 Disposition
      of Assets.
      So long
      as the Preferred Shares remain outstanding, neither the Company nor any
      Subsidiary shall sell, transfer or otherwise dispose of any of its properties,
      assets and rights including,

     

    

    
      
        
          
          

        

        
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    without
      limitation, its software and intellectual property, to any person except for
      sales to customers in the ordinary course of business or with the prior written
      consent of the holders of a majority of the Preferred Shares then
      outstanding.

     

    3.16 Reporting
      Status. So
      long
      as a Purchaser beneficially owns any of the Shares, the Company shall timely
      file (or obtain proper and timely extensions in respect thereof and file within
      the applicable grace period under the Exchange Act) all reports required to
      be
      filed with the Commission pursuant to the Exchange Act, and the Company shall
      not terminate its status as an issuer required to file reports under the
      Exchange Act even if the Exchange Act or the rules and regulations thereunder
      would permit such termination.

     

    3.17 Disclosure
      of Transaction.
      The
      Company shall issue a press release describing the material terms of the
      transactions contemplated hereby (the "Press
      Release")
      as
      soon as practicable after the Closing but in no event later than 9:00 A.M.
      Eastern Time on the first Trading Day following the Closing Date. The Press
      Release shall be subject to prior review and comment by the Purchasers.
      "Trading
      Day"
      means
      any day during which the OTC Bulletin Board (or other quotation venue or
      principal exchange on which the Common Stock is quoted or traded) shall be
      open
      for trading.

     

    3.18 Disclosure
      of Material Information.
      The
      Company covenants and agrees that neither it nor any other person acting on
      its
      behalf has provided or will provide any Purchaser or its agents or counsel
      with
      any information that the Company believes constitutes material non-public
      information (other than with respect to the transactions contemplated by this
      Agreement), unless prior thereto such Purchaser shall have executed a written
      agreement regarding the confidentiality and use of such information.  The
      Company understands and confirms that each Purchaser shall be relying on the
      foregoing representations in effecting transactions in securities of the
      Company.
      Notwithstanding the requirements in this Section 3.18 in the event of a breach
      of the foregoing covenant by the Company, any of its subsidiaries, or any of
      its
      or their respective officers, directors, employees and agents, in addition
      to
      any other remedy provided herein or in the Transaction Documents, a Purchaser
      shall have the right to make a public disclosure, in the form of a press
      release, public advertisement or otherwise, of such material, nonpublic
      information without the prior approval by the Company, its subsidiaries, or
      any
      of its or their respective officers, directors, employees or agents. No
      Purchaser shall have any liability to the Company, its subsidiaries, or any
      of
      its or their respective officers, directors, employees, stockholders or agents
      for any such disclosure.

     

    3.19 Pledge
      of Securities.
      The
      Company acknowledges and agrees that the Shares may be pledged by a Purchaser
      in
      connection with a bona fide
      margin
      agreement or other loan or financing arrangement that is secured by the Common
      Stock. The pledge of Common Stock shall not be deemed to be a transfer, sale
      or
      assignment of the Common Stock hereunder, and no Purchaser effecting a pledge
      of
      Common Stock shall be required to provide the Company with any notice thereof
      or

    
      
        
          
          

        

        
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    otherwise
      make any delivery to the Company pursuant to this Agreement or any other
      Transaction Document; provided that a Purchaser and its pledgee shall be
      required to comply with the provisions of Article
      V
      hereof
      in order to effect a sale, transfer or assignment of Common Stock to such
      pledgee. At the Purchasers' expense, the Company hereby agrees to execute and
      deliver such documentation as a pledgee of the Common Stock may reasonably
      request in connection with a pledge of the Common Stock to such pledgee by
      a
      Purchaser.
      Notwithstanding the above, no Purchaser shall permit any such pledgee, or such
      pledgee’s affiliates, to engage in any short sales in respect of any such
      pledged shares.

     

    3.20 Form
      SB-2 Eligibility.
      The
      Company currently meets the "registrant eligibility" and transaction
      requirements set forth in the general instructions to Form SB-2 applicable
      to
      "resale" registrations on Form SB-2 and the Company shall file all reports
      required to be filed by the Company with the Commission in a timely
      manner.

     

    3.21 Lock-Up
      Agreement.
      The
      persons listed on Schedule
      3.21
      attached
      hereto shall be subject to the terms and provisions of a lock-up agreement
      in
      substantially the form as Exhibit
      E
      hereto
      (the "Lock-Up
      Agreement"),
      which
      shall provide the manner in which such persons will sell, transfer or dispose
      of
      their shares of Common Stock.

     

    3.22 DTC
      Status.
      Prior
      to the effective date of the Registration Statement, the Company's transfer
      agent shall be a participant in and the Common Stock shall be eligible for
      transfer pursuant to the Depository Trust Company Automated Securities Transfer
      Program.

     

    3.23 Variable
      Rate Transactions; Additional Registration Statements.

     

    (a) For
      a
      period of two (2) years following the Closing Date, the Company shall
be
      prohibited from effecting or entering into an agreement to effect any subsequent
      financing involving a "Variable
      Rate Transaction".
      The
      term "Variable
      Rate Transaction"
      shall
      mean a transaction in which the Company issues or sells (i) any debt or equity
      securities that are convertible into, exchangeable or exercisable for, or
      include the right to receive additional shares of Common Stock either (A) at
      a
      conversion, exercise or exchange rate or other price that is based upon and/or
      varies with the trading prices of or quotations for the shares of Common Stock
      at any time after the initial issuance of such debt or equity securities, or
      (B)
      with a conversion, exercise or exchange price that is subject to being reset
      at
      some future date after the initial issuance of such debt or equity security
      or
      upon the occurrence of specified or contingent events directly or indirectly
      related to the business of the Company or the market for the Common Stock or
      (ii) any
      amortizing convertible security which amortizes prior to its maturity date,
      where the Company is required to or has the option to (or the investor in such
      transaction has the option to require the Company to) make such amortization
      payments in shares of Common Stock (whether

    

    
      
        
          
          

        

        
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    or
      not
      such payments in stock are subject to certain equity conditions), or (iii)
      enters
      into any agreement, including, but not limited to, an equity line of credit,
      whereby the Company may sell securities at a future determined
      price.

     

    (b) For
      the
      period commencing on the Closing Date and ending on the earlier of (i) the
      date
      that is ninety (90) days following the effective date of the Registration
      Statement (as defined in the Registration Rights Agreement) or (ii) October
      31,
      2007, the Company shall not file any registration statement under the Securities
      Act without the prior written consent of the Purchasers except for the
      Registration Statement to be filed in accordance with the Registration Rights
      Agreement to the transactions contemplated by this Agreement.

     

    3.24 Dispute
      Resolution.
      In the
      case of a dispute as to the determination of the Company entering into an
      agreement to enter into a Variable Rate Transaction, the Company shall submit
      the disputed determinations or arithmetic calculations via facsimile within
      three (3) Business Days of the securities issuance or other event giving rise
      to
      such dispute, to the Holder (as defined below). If the Holder and the Company
      are unable to agree upon such determination within five (5) Business Days of
      such disputed determination being submitted to the Holder, then the Company
      shall, within three (3) Business Days submit via facsimile a copy of the
      disputed agreement or other documentation which the Holder believes may
      constitute a Variable Rate Transaction, to an independent law firm (having
      at
      least 400 attorneys) selected by the Company and approved by Holder. The
      Company, at the Company's expense, shall cause the law firm to perform the
      determinations and notify the Company and the Holder of the results no later
      than ten (10) Business Days from the time it receives the disputed
      determinations. Such law firm’s determination shall be binding upon all parties
      absent demonstrable error. The procedures required by this Section 3.24 are
      collectively referred to herein as the “Variable
      Rate Dispute Resolution Procedures.”
      “Holder”
means
      the Purchasers and each of their respective successors and assigns.

     

    3.25 Financial
      Covenants.
      For the
      three (3)-year period following the Closing Date (the "Financial
      Covenant Period"),
      the
      Company agrees that the following financial covenants shall apply:

     

    (a) Maximum
      Capital Expenditures.
      The
      Company will not permit its Consolidated Capital Expenditures during any fiscal
      quarter to exceed $200,000 plus, for each fiscal quarter ending after June
      30,
      2007, the Capex Carryover Amount, if any, for the prior fiscal quarter; provided
      that the Consolidated Capital Expenditures during any four consecutive fiscal
      quarters shall not exceed $1,200,000. The term "Consolidated
      Capital Expenditures"
      means,
      for any period, the sum of, without duplication, (a) all cash expenditures
      made,
      directly or indirectly, by the Company and its subsidiaries during such period
      for equipment, fixed assets, real property or improvements, or for replacements
      or substitutions therefor or additions thereto, that have been or should be,
      in
      accordance with GAAP, reflected as additions to property, plant or equipment
      on
      a balance sheet of the Company and its subsidiaries plus (b) the aggregate
      principal amount of all indebtedness (including Capitalized Lease Obligations)
      assumed or incurred in connection with any such expenditures. For purposes
      of
      this definition, the purchase price of equipment that is purchased
      simultaneously with the trade in of existing equipment or

    

    
      
        
          
          

        

        
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    with
      insurance or condemnation proceeds shall be included in Consolidated Capital
      Expenditures only to the extent of the gross amount of such purchase price
      less
      the credit granted by the seller of such equipment for the equipment being
      traded in at such time or the amount of such insurance or condemnation proceeds,
      as the case may be. The term "Capex
      Carryover Amount"
      means,
      for any fiscal quarter, (i) the amount of Consolidated Capital Expenditures
      permitted during such fiscal quarter pursuant to this Section 3.25(a) (after
      giving effect to the Capex Carryover Amount, if any, for the previous fiscal
      quarter) minus (ii) the Consolidated Capital Expenditures during such fiscal
      quarter.

     

    (b) Minimum
      EBITDA.
      The
      Company will not permit its Consolidated EBITDA for any fiscal quarter
      calculated for the Test Period ending on the last day of such fiscal quarter;
      provided that for the Test Period ending on September 30, 2007, Consolidated
      EBITDA shall be (x) Consolidated EBITDA for the three-fiscal-quarter period
      ending on September 30, 2007 times (y) 4/3 to be less than (x) $500,000 for
      fiscal quarters ending on or before September 30, 2007, (y) $2,000,000
      for fiscal quarters ending on or after December 31, 2007, and on or before
      September 30, 2008, or (z) $3,000,000 for fiscal quarters ending on or
      after December 31, 2008. The term "Test
      Period"
      shall
      mean each period of four consecutive fiscal quarters of the Company and its
      subsidiaries then last ended (in each case taken as one accounting period).
      The
      term "Consolidated
      EBITDA"
      means,
      for the Company and its subsidiaries for any period, an amount equal to (a)
      the
      sum (without duplication) of (i) Consolidated Net Income for such period plus
      (ii) to the extent deducted in determining Consolidated Net Income for such
      period, (A) Consolidated Interest Expense; (B) income tax expense; (C)
      depreciation and amortization; (D) net losses on Asset Sales for such period;
      (E) other non-cash charges for such period (excluding any such non-cash charge
      to the extent that it represents an accrual of or reserve for cash expenditures
      in any future period) (F) reasonable actual out-of-pocket transaction costs
      and
      integration expenses related directly to the Acquisitions and Approved
      Acquisitions, if any; provided that the total costs and expenses added back
      pursuant to this clause (F) for all periods shall not exceed $2,500,000; (G)
      litigation costs and expenses and settlement costs incurred on or prior to
      the
      Closing Date; provided that the total costs and expenses added back pursuant
      to
      this clause (G) for all periods shall not exceed $4,900,000; (H) Compliance
      Costs; provided that the Compliance Costs added back pursuant to this clause
      (H)
      for all periods shall not exceed $500,000; and (I) owners’ fees associated with
      Acquisitions and Approved Acquisitions associated with any part of the period
      in
      which the Acquisition or Approved Acquisition was not a subsidiary of the
      Company minus (b) to the extent included in determining Consolidated Net Income
      for such period, (i) net gains on Asset Sales for such period, (ii) other
      non-cash items increasing Consolidated Net Income for such period (excluding
      any
      non-cash gains for such period resulting from the reversal of an accrual or
      reduction or elimination of a reserve established in a prior period to the
      extent the related non-cash charge was excluded in accordance with clause
      (a)(ii)(E) immediately above), in each case determined for such period on a
      consolidated basis in accordance with GAAP. The term "Consolidated
      Net Income"
      means,
      for any period, the net income (or loss) of the Company and its subsidiaries,
      but excluding therefrom (to the extent otherwise included therein) (i) any
      extraordinary gains or losses, (ii) any gains attributable to write-ups of
      Assets, (iii) the net income (or loss) of any subsidiary of the Company if
      and
      to the extent such subsidiary is unable or otherwise prohibited by any
      contractual restrictions, charter documents, or law applicable to such
      subsidiary to make or pay any dividend or distribution to the holders of its
      equity interests,

    

    
      
        
          
          

        

        
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    except
      to
      the extent such net income is actually made or paid as a dividend or
      distribution to the Company or any subsidiary not subject to such restrictions
      and (iv) any income (or loss) of any person (other than acquisition targets
      of
      the Company) accrued prior to the date (a) such person becomes a subsidiary,
      (b)
      is merged into or consolidated with the Company or any of its subsidiaries
      or
      (c) such person's assets are acquired by the Company or any of its subsidiaries,
      in each case determined for such period on a consolidated basis in accordance
      with GAAP. The term "Consolidated
      Interest Expense"
      means,
      for the Company and its subsidiaries for any period determined on a consolidated
      basis in accordance with GAAP, the total interest expense of the Company and
      its
      subsidiaries for such period, including without limitation the interest
      component of any payments in respect of Capitalized Lease Obligations
      capitalized or expensed during such period (whether or not actually paid during
      such period). The term "Asset
      Sale"
      means
      any direct or indirect sale, issuance, conveyance, transfer, assignment or
      other
      transfer for value by the Company or any of its subsidiaries to any person
      other
      than the Company or its subsidiaries of any property or assets of the Company
      or
      any subsidiary other than in the ordinary course of business. The term
      "Compliance
      Costs"
      means,
      for any period, all costs and expenses incurred by the Company directly as
      a
      result of complying with its obligations under this Agreement and under the
      Registration Rights Agreement, including but not limited to (a) the costs of
      all
      legal and accounting services related to preparing Forms 8-KSB describing the
      Acquisitions and Approved Acquisitions, if any, and a Form 8-KSB/A containing
      audited financial statements of the Acquisitions and Approved Acquisitions,
      if
      any, interim financial statements and pro forma financial statement disclosures,
      (b) the costs of preparing and filing a registration statement with the
      Commission registering the Shares, (iii) the costs of a consultant to determine
      purchase price allocations and the accounting value of the Warrants, and (iv)
      a
      public relations firm to manage publicity for the Acquisitions and Approved
      Acquisitions, if any, and the financing related thereto.

     

    3.26 Information
      Statement.
      The
      Company shall prepare and file with the Commission, as promptly as practicable
      after the date hereof but in no event later than twenty (20) days after the
      date
      hereof, an information statement (the "Preliminary
      Information Statement"),
      substantially in the form that has been previously reviewed and reasonably
      approved by the Purchasers and a counsel of their choice, informing the
      stockholders of the Company of the receipt of the consents of the requisite
      stockholders (the "Stockholder
      Approval")
      approving resolutions to amend the Certificate of Incorporation, (a) to increase
      the authorized number of shares of common stock from 150,000,000 shares to
      250,000,000 shares and (b) to amend the rights and preferences of the Series
      C
      Preferred Stock, in substantially the form attached as Exhibit
      K
      hereto.
      No more than ten (10) days after filing the Preliminary Information Statement,
      or, in the event that the Commission comments on the Preliminary Information
      Statement, no more than ten (10) days following the amendment to the Preliminary
      Information Statement accepted by the Commission without comment, the Company
      shall file a definitive information statement with the Commission and transmit
      the requisite notice to its stockholders of record, provided, that, in the
      event
      that comments are received from the Commission, the Company responds to such
      comments within ten (10) business days of receipt of such comments from the
      Commission. Additionally, at the Closing, the Company shall have provided to
      the
      Purchasers evidence reasonably satisfactory to the Purchasers that the Company
      has obtained from its Board of

     

    

    
      
        
          
          

        

        
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    Directors
      and the shares of Company stock outstanding as of immediately prior to the
      Closing all requisite consents and approvals to increase the authorized common
      stock and amend the Certificate of Incorporation.

     

    ARTICLE
      IV

     

    CONDITIONS

     

    4.1 Conditions
      Precedent to the Obligation of the Company to Sell the Shares.
      The
      obligation hereunder of the Company to issue and sell the Preferred Shares
      and
      the Warrants to the Purchasers is subject to the satisfaction or waiver, at
      or
      before the Closing, of each of the conditions set forth below. These conditions
      are for the Company's sole benefit and may be waived by the Company at any
      time
      in its sole discretion.

     

    (a) Accuracy
      of Each Purchaser's Representations and Warranties.
      The
      representations and warranties of each Purchaser shall be true and correct
      in
      all material respects as of the date when made and as of the Closing Date as
      though made at that time, except for representations and warranties that are
      expressly made as of a particular date, which shall be true and correct in
      all
      material respects as of such date.

     

    (b) Performance
      by the Purchasers.
      Each
      Purchaser shall have performed, satisfied and complied in all respects with
      all
      covenants, agreements and conditions required by this Agreement to be performed,
      satisfied or complied with by such Purchaser at or prior to the
      Closing.

     

    (c) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement.

     

    (d) Delivery
      of Purchase Price.
      The
      Purchase Price for the Preferred Shares and Warrants has been delivered to
      the
      Company at the Closing Date.

     

    (e) Delivery
      of Transaction Documents.
      The
      Transaction Documents shall have been duly executed and delivered by the
      Purchasers and, with respect to the Escrow Agreement, the Escrow Agent, to
      the
      Company.

     

    4.2 Conditions
      Precedent to the Obligation of the Purchasers to Purchase the
      Shares.
      The
      obligation hereunder of each Purchaser to acquire and pay for the Preferred
      Shares and the Warrants is subject to the satisfaction or waiver, at or before
      the Closing, of each of the conditions set forth below. These conditions are
      for
      each Purchaser's sole benefit and may be waived by such Purchaser at any time
      in
      its sole discretion.

     

    (a) Accuracy
      of the Company's Representations and Warranties.
      Each of
      the representations and warranties of the Company in this Agreement and the
      Registration Rights Agreement shall be true and correct in all respects as
      of
      the date when made and as of the

     

    

    
      
        
          
          

        

        
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    Closing
      Date as though made at that time (except for representations and warranties
      that
      are expressly made as of a particular date), which shall be true and correct
      in
      all respects as of such date.

     

    (b) Performance
      by the Company.
      The
      Company shall have performed, satisfied and complied in all respects with all
      covenants, agreements and conditions required by this Agreement to be performed,
      satisfied or complied with by the Company at or prior to the
      Closing.

     

    (c) No
      Suspension, etc.
      Trading
      in the Common Stock shall not have been suspended by the Commission or the
      principal exchange or market on which Common Stock is quoted or traded (except
      for any suspension of trading of limited duration agreed to by the Company,
      which suspension shall be terminated prior to the Closing), and, at any time
      prior to the Closing Date, trading in securities generally as reported by
      Bloomberg Financial Markets ("Bloomberg")
      shall
      not have been suspended or limited, or minimum prices shall not have been
      established on securities whose trades are reported by Bloomberg, or on the
      New
      York Stock Exchange, nor shall a banking moratorium have been declared either
      by
      the United States or New York State authorities, nor shall there have occurred
      any material outbreak or escalation of hostilities or other national or
      international calamity or crisis of such magnitude in its effect on, or any
      material adverse change in any financial market which, in each case, in the
      judgment of such Purchaser, makes it impracticable or inadvisable to purchase
      the Preferred Shares.

     

    (d) No
      Injunction.
      No
      statute, rule, regulation, executive order, decree, ruling or injunction shall
      have been enacted, entered, promulgated or endorsed by any court or governmental
      authority of competent jurisdiction which prohibits the consummation of any
      of
      the transactions contemplated by this Agreement.

     

    (e) No
      Proceedings or Litigation.
      No
      action, suit or proceeding before any arbitrator or any governmental authority
      shall have been commenced, and no investigation by any governmental authority
      shall have been threatened, against the Company or any subsidiary, or any of
      the
      officers, directors or affiliates of the Company or any subsidiary seeking
      to
      restrain, prevent or change the transactions contemplated by this Agreement,
      or
      seeking damages in connection with such transactions.

     

    (f) Delivery
      of Transaction Documents.
      The
      Transaction Documents shall have been duly executed and delivered by the Company
      and, with respect to the Escrow Agreement, the Escrow Agent, to the
      Purchasers.

     

    (g) Series
      D Director.
      The
      Company shall have taken all necessary corporate actions such that immediately
      following the Closing, the number of directors constituting the full board
      of
      directors shall be increased by one (1) member (the "Series
      D Director"),
      who
      shall be selected by the Purchasers and whose appointment to the board of
      directors becomes effective as of the Closing, and who shall be nominated by
      the
      Issuer at each annual stockholders' meeting for election by the stockholders.
      Such additional director shall initially be Russell Cleveland.

     

    (h) Series
      D Director Indemnification Agreement.
      The
      Company shall have entered into an Indemnification Agreement with the Series
      D
      Director which indemnifies the

    

    
      
        
          
          

        

        
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    Series
      D
      Director to the fullest extent of applicable law, in a form reasonably
      acceptable to the Purchasers.

     

    (i) Director's
      and Officer's Insurance.
      The
      Company shall obtain standard Director's and Officer's Insurance on commercially
      reasonable terms.

     

    (j) Certificate
      of Designation of Rights and Preferences.
      Prior
      to the Closing, the Certificate of Designation in the form of Exhibit
      B
      attached
      hereto and the Series D-2 Certificate of Designation in the form of Exhibit
      B-2
      shall
      have been filed with the Secretary of State of the State of
      Delaware.

     

    (k) Opinion
      of Counsel, etc.
      At the
      Closing, the Purchasers shall have received one or more opinions of counsel
      to
      the Company, dated the date of the Closing, in the form of Exhibit
      H
      hereto,
      and such other certificates and documents as the Purchasers or its counsel
      shall
      reasonably require incident to the Closing.

     

    (l) Registration
      Rights Agreement.
      At the
      Closing, the Company shall have executed and delivered the Registration Rights
      Agreement to each Purchaser.

     

    (m) Certificates.
      The
      Company shall have executed and delivered to the Purchasers the certificates
      (in
      such denominations as such Purchaser shall request) for the Preferred Shares
      and
      the Warrants being acquired by such Purchaser at the Closing (in such
      denominations as such Purchaser shall request).

     

    (n) Resolutions.
      The
      Board of Directors of the Company shall have adopted resolutions consistent
      with
      Section 2.1(b) hereof in a form reasonably acceptable to such Purchaser (the
      "Resolutions").

     

    (o) Reservation
      of Shares.
      As of
      the Closing Date, the Company shall have reserved out of its authorized and
      unissued Common Stock, solely for the purpose of effecting the conversion of
      the
      Preferred Shares, J Warrant Shares and the exercise of the Warrants, a number
      of
      shares of Common Stock equal to one hundred twenty percent (120%) of the
      aggregate number of Conversion Shares issuable upon conversion of the Preferred
      Shares outstanding on the Closing Date and the number of Warrant Shares issuable
      upon exercise of the number of Warrants assuming such Warrants were granted
      on
      the Closing Date.

     

    (p) Transfer
      Agent Instructions.
      The
      Irrevocable Transfer Agent Instructions, in the form of Exhibit
      G
      attached
      hereto, shall have been delivered to and acknowledged in writing by the
      Company's transfer agent.

     

    (q) Completion
      of Due Diligence.
      As of
      the Closing Date, Purchasers shall have completed their due diligence review
      of
      the Company and its subsidiaries to their sole satisfaction.

     

    (r) Lock-Up
      Agreement.
      As of
      the Closing Date, the persons listed on Schedule
      3.21
      hereto
      shall have delivered to the Purchasers a fully executed Lock-Up Agreement in
      the
      form of Exhibit E
      attached
      hereto.

    

    
      
        
          
          

        

        
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    (s) Escrow
      Agreement.
      At the
      Closing, the Company and the Escrow Agent shall have executed and delivered
      the
      Escrow Agreement to each Purchaser.

     

    (t) Secretary's
      Certificate.
      The
      Company shall have delivered to such Purchaser a secretary's certificate, dated
      as of the Closing Date, as to (i) the Resolutions, (ii) the Certificate, (iii)
      the Bylaws, (iv) the Certificate of Designation, each as in effect at the
      Closing, and (v) the authority and incumbency of the officers of the Company
      executing the Transaction Documents and any other documents required to be
      executed or delivered in connection therewith.

     

    (u) Officer's
      Certificate.
      The
      Company shall have delivered to the Purchasers a certificate of an executive
      officer of the Company, dated as of the Closing Date, confirming the accuracy
      of
      the Company's representations, warranties and covenants as of the Closing Date
      and confirming the compliance by the Company with the conditions precedent
      set
      forth in this Section 4.2 as of the Closing Date.

     

    (v) Variable-Priced
      Securities.
      Prior
      to the Closing Date, any and all outstanding variable-priced securities of
      the
      Company shall be redeemed or prepaid or otherwise converted into or exchanged
      for fixed-priced securities of the Company.

     

    (w) Evidence
      of Consent to Amend Certificate of Incorporation.
      The
      Company shall have provided to the Purchasers evidence reasonably satisfactory
      to the Purchasers that the Company has obtained from its Board of Directors
      and
      the shares of Company stock outstanding as of immediately prior to the Closing
      all requisite consents and approvals to increase the authorized common stock
      and
      amend the Certificate of Incorporation.

     

    (x) Material
      Adverse Effect.
      No
      Material Adverse Effect shall have occurred at or before the Closing
      Date.

     

    ARTICLE
      V

     

    STOCK
      CERTIFICATE LEGEND

     

    5.1 Legend.
      Each
      certificate representing the Preferred Shares and the Warrants, and, if
      appropriate, securities issued upon conversion thereof, shall be stamped or
      otherwise imprinted with a legend substantially in the following form (in
      addition to any legend required by applicable state securities or "blue sky"
      laws):

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
      OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
      DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
      STATE

     

    

    
      
        
          
          

        

        
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    SECURITIES
      LAWS OR BPO MANAGEMENT SERVICES, INC. SHALL HAVE RECEIVED AN OPINION OF COUNSEL
      THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
      PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

     

    The
      Company agrees to reissue certificates representing any of the Conversion Shares
      and the Warrant Shares, without the legend set forth above if at such time,
      prior to making any transfer of any such securities, such holder thereof shall
      give written notice to the Company describing the manner and terms of such
      transfer and removal as the Company may reasonably request. Such proposed
      transfer and removal will not be effected until: (a) either (i) the Company
      has
      received an opinion of counsel reasonably satisfactory to the Company, to the
      effect that the registration of the Conversion Shares or the Warrant Shares
      under the Securities Act is not required in connection with such proposed
      transfer, (ii) a registration statement under the Securities Act covering such
      proposed disposition has been filed by the Company with the Commission and
      has
      become effective under the Securities Act, (iii) the Company has received other
      evidence reasonably satisfactory to the Company that such registration and
      qualification under the Securities Act and state securities laws are not
      required, or (iv) the holder provides the Company with reasonable assurances
      that such security can be sold pursuant to Rule 144 under the Securities Act;
      and (b) either (i) the Company has received an opinion of counsel reasonably
      satisfactory to the Company, to the effect that registration or qualification
      under the securities or "blue sky" laws of any state is not required in
      connection with such proposed disposition, or (ii) compliance with applicable
      state securities or "blue sky" laws has been effected or a valid exemption
      exists with respect thereto. The Company will respond to any such notice from
      a
      holder within five (5) business days. In the case of any proposed transfer
      under
      this Section 5.1, the Company will use reasonable efforts to comply with any
      such applicable state securities or "blue sky" laws, but shall in no event
      be
      required, (x) to qualify to do business in any state where it is not then
      qualified, (y) to take any action that would subject it to tax or to the general
      service of process in any state where it is not then subject, or (z) to comply
      with state securities or "blue sky" laws of any state for which registration
      by
      coordination is unavailable to the Company. The restrictions on transfer
      contained in this Section 5.1 shall be in addition to, and not by way of
      limitation of, any other restrictions on transfer contained in any other section
      of this Agreement. Whenever
      a
      certificate representing the Conversion Shares or Warrant Shares is required
      to
      be issued to a Purchaser without a legend, in lieu of delivering physical
      certificates representing the Conversion Shares or Warrant Shares (provided
      that a registration statement under the Securities Act providing for the resale
      of the Warrant Shares and Conversion Shares is then in effect and such request
      is in connection with a sale),
      the
      Company shall cause its transfer agent to electronically transmit the Conversion
      Shares or Warrant Shares to a Purchaser by crediting the account of such
      Purchaser's Prime Broker with the Depository Trust Company ("DTC")
      through its Deposit Withdrawal Agent Commission ("DWAC")
      system
      (to the extent not inconsistent with any provisions of this Agreement) provided
      that the Company and the Company's transfer agent are participating in DTC
      through the DWAC system.

     

    
      
        
        

      

      
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    ARTICLE
      VI

     

    RIGHTS
      OF FIRST OFFER

     

    6.1 Subsequent
      Offerings.
      For a
      period of one (1) year following the Closing and subject to applicable
      securities laws, each Purchaser shall have a right of first offer to purchase
      its pro rata share of all Equity Securities (as defined below) that the Company
      may, from time to time, propose to sell and issue after the date of this
      Agreement, other than the Equity Securities excluded by Section 6.5 hereof.
      Each
      Purchaser’s pro rata share is equal to the number of Preferred Shares purchased
      by the Purchaser, divided by the total number of Preferred Shares issued
      pursuant to this Agreement. "Equity Securities" shall mean (i) any Common Stock,
      preferred stock or other security of the Company, (ii) any security convertible
      into or exercisable or exchangeable for, with or without consideration, any
      Common Stock, preferred stock or other security (including any option to
      purchase such a convertible security) of the Company, (iii) any security
      carrying any warrant or right to subscribe to or purchase any Common Stock,
      preferred stock or other security of the Company or (iv) any such warrant or
      right.

     

    6.2 Exercise
      of Rights.
      If the
      Company proposes to issue any Equity Securities, it shall give each Purchaser
      written notice of its intention, describing the Equity Securities, the price
      and
      the terms and conditions upon which the Company proposes to issue the same.
      Each
      Purchaser shall have twenty (20) business days from the giving of such notice
      to
      agree to purchase its pro rata share of the Equity Securities for the price
      and
      upon the terms and conditions specified in the notice by giving written notice
      to the Company and stating therein the quantity of Equity Securities to be
      purchased. Notwithstanding the foregoing, the right of first offer in this
      Section 6.2 shall not be applicable with respect to any Purchaser and any
      subsequent securities issuance, if (i) at the time of such subsequent securities
      issuance, the Purchaser is not an "accredited investor," as that term is then
      defined in Rule 501(a) under the Securities Act, and (ii) such subsequent
      securities issuance is otherwise being offered only to accredited
      investors.

     

    6.3 Issuance
      of Equity Securities to Other Persons.
      If not
      all of the Purchasers elect to purchase their pro rata share of the Equity
      Securities, then the Company shall promptly notify in writing the Purchasers
      who
      do so elect (each, a "Fully Exercising Purchaser") and shall offer such Fully
      Exercising Purchaser the right to acquire such unsubscribed shares on a pro
      rata
      basis. Each Fully Exercising Purchaser shall have five (5) days after receipt
      of
      such notice to notify the Company of its election to purchase all or a portion
      thereof of the unsubscribed shares that is equal to the proportion that the
      number of shares of Common Stock issued and held, or issuable upon conversion
      and exercise of all convertible or exercisable securities then held, by such
      Fully Exercising Purchaser bears to the total number of shares of Common Stock
      issued and held, or issuable upon conversion and exercise of all convertible
      or
      exercisable securities then held, by all such Fully Exercising Purchasers.
      The
      Company shall have one hundred twenty (120) days thereafter to sell the Equity
      Securities in respect of which the Purchaser’s rights were not exercised, at a
      price not lower and upon general

    

    
      
        
          
          

        

        
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    terms
      and
      conditions not materially more favorable to the purchasers thereof than
      specified in the Company’s notice to the Purchasers pursuant to Section 6.2
      hereof. If the Company has not sold such Equity Securities within one hundred
      twenty (120) days of the notice provided pursuant to Section 6.2, the Company
      shall not thereafter issue or sell any Equity Securities, without first offering
      such securities to the Purchasers in the manner provided above.

     

    6.4 Termination
      and Waiver of Rights of First Offer.
      The
      rights of first offer established by this Article VI shall not apply to, and
      shall terminate upon the consummation of a transaction in which the stockholders
      of the Company immediately prior to the transaction own less than 33% of the
      voting capital stock (on an as converted to Common Stock basis) of the surviving
      corporation following the transaction. Notwithstanding Section 6.3 hereof,
      the
      rights of first offer established by this Article VI may be amended, or any
      provision waived with and only with the written consent of the Company and
      the
      Purchasers holding not less than 66% of the Preferred Shares, or as permitted
      by
      Section 9.3.

     

    6.5 Excluded
      Securities.
      The
      rights of first offer established by this Article VI shall have no application
      to any of the following Equity Securities:

     

    (a) Common
      Stock issued or issuable pursuant to stock dividends, stock splits or similar
      transactions, as described in the Company’s Restated Certificate of
      Incorporation;

     

    (b) securities
      issuable upon conversion of any of the Series A Preferred shares, the Series
      B
      Preferred shares, the Preferred Shares, the J Warrant Shares or as a dividend
      or
      distribution on the Series A Preferred shares, the Preferred Shares or the
      J
      Warrant Shares;

     

    (c) securities
      issued upon the conversion of any debenture, warrant, option, or other
      convertible security;

     

    (d) Common
      Stock, or options to purchase such shares of Common Stock, issued or issuable
      to
      employees or directors of, or consultants to, the Company directly or pursuant
      to a stock option plan or restricted stock plan approved by a majority of the
      Board of Directors;

     

    (e) Common
      Stock, or options or warrants to purchase Common Stock, issued or issuable
      to
      financial institutions or lessors in connection with commercial credit
      arrangements, equipment financings, commercial property lease transactions
      or
      similar transactions, provided that such issuance is approved by a majority
      of
      the Board of Directors;

     

    (f) Common
      Stock, or warrants or options to purchase Common Stock, issued in connection
      with bona fide acquisitions, mergers or similar transactions, the terms of
      which
      are approved by a majority of the Board of Directors; and

     

    (g) Common
      Stock issued or issuable to an entity as a component of any business
      relationship with such entity for the purpose of (i) joint venture, technology
      licensing or development activities, (ii) distribution, supply or manufacture
      of
      the Company’s products or

    

    
      
        
          
          

        

        
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    services,
      or (iii) any other arrangements involving corporate partners that are primarily
      for purposes other than raising capital, the terms of which business
      relationship with such entity are approved by a majority of the Board of
      Directors. 

     

    ARTICLE
      VII

     

    INDEMNIFICATION

     

    7.1 Company
      Indemnity.
      The
      Company agrees to indemnify and hold harmless the Purchasers (and their
      respective directors, officers, managers, partners, members, stockholders,
      affiliates, agents, successors and assigns) from and against any and all losses,
      liabilities, deficiencies, costs, damages and expenses (including, without
      limitation, reasonable attorneys' fees, charges and disbursements) incurred
      by
      the Purchasers as a result of any inaccuracy in or breach of the
      representations, warranties or covenants made by the Company
      herein.

     

    7.2 Indemnification
      Procedure.
      Any
      party entitled to indemnification under this Article
      VII
      (an
      "indemnified party") will give written notice to the indemnifying party of
      any
      matters giving rise to a claim for indemnification; provided, that the failure
      of any party entitled to indemnification hereunder to give notice as provided
      herein shall not relieve the indemnifying party of its obligations under this
      Article
      VII
      except
      to the extent that the indemnifying party is actually prejudiced by such failure
      to give notice. In case any action, proceeding or claim is brought against
      an
      indemnified party in respect of which indemnification is sought hereunder,
      the
      indemnifying party shall be entitled to participate in and, unless in the
      reasonable judgment of the indemnified party a conflict of interest between
      it
      and the indemnifying party may exist with respect of such action, proceeding
      or
      claim, to assume the defense thereof with counsel reasonably satisfactory to
      the
      indemnified party. In the event that the indemnifying party advises an
      indemnified party that it will contest such a claim for indemnification
      hereunder, or fails, within thirty (30) days of receipt of any indemnification
      notice to notify, in writing, such person of its election to defend, settle
      or
      compromise, at its sole cost and expense, any action, proceeding or claim (or
      discontinues its defense at any time after it commences such defense), then
      the
      indemnified party may, at its option, defend, settle or otherwise compromise
      or
      pay such action or claim. In any event, unless and until the indemnifying party
      elects in writing to assume and does so assume the defense of any such claim,
      proceeding or action, the indemnified party's costs and expenses arising out
      of
      the defense, settlement or compromise of any such action, claim or proceeding
      shall be losses subject to indemnification hereunder. The indemnified party
      shall cooperate fully with the indemnifying party in connection with any
      negotiation or defense of any such action or claim by the indemnifying party
      and
      shall furnish to the indemnifying party all information reasonably available
      to
      the indemnified party which relates to such action or claim. The indemnifying
      party shall keep the indemnified party fully apprised at all times as to the
      status of the defense or any settlement negotiations with respect thereto.
      If
      the indemnifying party elects to defend any such action or claim, then the
      indemnified party shall be entitled to participate in such defense with counsel
      of its choice at its sole cost and expense. The indemnifying party shall not
      be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent. 

    

    
      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

    

    

    Notwithstanding
      anything in this Article
      VII
      to the
      contrary, the indemnifying party shall not, without the indemnified party's
      prior written consent, settle or compromise any claim or consent to entry of
      any
      judgment in respect thereof which imposes any future obligation on the
      indemnified party or which does not include, as an unconditional term thereof,
      the giving by the claimant or the plaintiff to the indemnified party of a
      release from all liability in respect of such claim. The indemnification
      required by this Article
      VII
      shall be
      made by periodic payments of the amount thereof during the course of
      investigation or defense, as and when bills are received or expense, loss,
      damage or liability is incurred, so long as the indemnified party irrevocably
      agrees to refund such moneys if it is ultimately determined by a court of
      competent jurisdiction that such party was not entitled to indemnification.
      The
      indemnity agreements contained herein shall be in addition to (a) any cause
      of
      action or similar rights of the indemnified party against the indemnifying
      party
      or others, and (b) any liabilities the indemnifying party may be subject to
      pursuant to the law.

     

    ARTICLE
      VIII

     

    TRIGGERING
      EVENTS

     

    8.1 Enforceability
      of Certificate of Designation.
      It is
      the intent of the parties that the rights, preferences, privileges and
      limitations of the Preferred Shares under the Certificate of Designation shall
      inure to the Purchasers (and their assignees hereunder) and holders of the
      Preferred Shares as stated in any other certificate of designation for any
      other
      equity instrument of the Company purchased by the Purchasers, all of which
      shall
      be deemed incorporated herein by reference. In the event, and to the extent,
      that any of the terms or provisions, or any portion thereof, of the Certificate
      of Designation or any other certificate of designation for any other equity
      instrument of the Company purchased by the Purchasers is held to be
      unenforceable or invalid (including all such terms and provisions of any such
      certificate of designation that is held to be void or is voided) by any court
      of
      competent jurisdiction, then the Purchasers and their successors and permitted
      assigns shall have under this Agreement the same rights, preferences and
      privileges as provided in the Certificate of Designation; provided
      that in
      the case of any payments due under the Certificate of Designation or any other
      certificate of designation for any other equity instrument of the Company
      purchased by the Purchasers, as incorporated herein by reference, there shall
      be
      made appropriate reductions for any payments actually made and not required
      to
      be rescinded or returned in respect of the shares of the Preferred Shares or
      other equity instrument of the Company purchased by the Purchasers, as
      applicable. The parties agree that the foregoing right of enforcement under
      this
      Section 8.1 shall be the sole and exclusive remedy of the Purchasers, their
      assignees or the holders with respect to any determination by any court of
      competent jurisdiction that any of the terms or provisions of the Certificate
      of
      Designation or any other certificate of designation for any other equity
      instrument of the Company purchased by the Purchasers are unenforceable or
      invalid under the law of the Company's domicile state provided that the
      Purchasers, their assignees or the holders receive the intended benefits set
      forth in the Certificate of Designation.

     

    8.2 Waiver
      of Triggering Event.
      A vote
      of not less than 66% of the outstanding Shares may waive any existing Triggering
      Event (as defined in the Certificate of Designation) under this Agreement,
      and
      its consequences.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    8.3 Officers'
      Certificate.
      Under
      this Agreement, the Company is required to provide an officers' certificate
      to
      the holders of the Shares promptly upon any such officer obtaining knowledge
      of
      any Triggering Event (provided that such officers shall provide such
      certification at least annually whether or not they know of any Triggering
      Event) that has occurred and, if applicable, describe such Triggering Event
      and
      the status thereof.

     

    ARTICLE
      IX

     

    MISCELLANEOUS

     

    9.1 Fees
      and Expenses.
      Except
      as otherwise set forth in this Agreement and the other Transaction Documents,
      each party shall pay the fees and expenses of its advisors, counsel, accountants
      and other experts, if any, and all other expenses, incurred by such party
      incident to the negotiation, preparation, execution, delivery and performance
      of
      this Agreement, provided
      that the
      Company shall pay all actual attorneys' fees and expenses (including
      disbursements and out-of-pocket expenses) incurred by the Purchasers in
      connection with (i) the preparation, negotiation, execution and delivery of
      this
      Agreement and the other Transaction Documents and the transactions contemplated
      thereunder, which payment shall be made at the Closing and shall not exceed
      $90,000 in the aggregate (including $10,000 to pay the legal expenses of RENN
      Capital Group, Inc., and the $10,000 retainer previously advanced by the
      Company), (ii) the filing and declaration of effectiveness by the Commission
      of
      the Registration Statement (as defined in the Registration Rights Agreement)
      and
      (iii) any amendments, modifications or waivers of this Agreement or any of
      the
      other Transaction Documents. The Company shall also pay up to $15,000 (less
      any
      amount previously paid by the Company relating thereto) to Vision Opportunity
      Master Fund, Ltd. at the Closing in connection with all due diligence expenses
      incurred by Vision Opportunity Capital Management, LLC, and all reasonable
      fees
      and expenses incurred by the Purchasers in connection with the enforcement
      of
      this Agreement or any of the other Transaction Documents, including, without
      limitation, all reasonable attorneys' fees and expenses.
      In
      addition, the Company shall pay all reasonable Escrow Agent's fees and expenses.
      The fees set forth in this Section 9.1 shall be paid at Closing.

     

    9.2 Specific
      Enforcement, Consent to Jurisdiction.

     

    (a) The
      Company and the Purchasers acknowledge and agree that irreparable damage would
      occur in the event that any of the provisions of this Agreement or the other
      Transaction Documents were not performed in accordance with their specific
      terms
      or were otherwise breached. It is accordingly agreed that the parties shall
      be
      entitled to an injunction or

    

    
      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

    

    

    injunctions
      to prevent or cure breaches of the provisions of this Agreement or the
      Registration Rights Agreement and to enforce specifically the terms and
      provisions hereof or thereof, this being in addition to any other remedy to
      which any of them may be entitled by law or equity.

     

    (b) Each
      of
      the Company and the Purchasers (i) hereby irrevocably submits to the
      jurisdiction of the United States District Court sitting in the Southern
      District of New York and the courts of the State of New York located in New
      York
      county for the purposes of any suit, action or proceeding arising out of or
      relating to this Agreement or any of the other Transaction Documents or the
      transactions contemplated hereby or thereby and (ii) hereby waives, and agrees
      not to assert in any such suit, action or proceeding, any claim that it is
      not
      personally subject to the jurisdiction of such court, that the suit, action
      or
      proceeding is brought in an inconvenient forum or that the venue of the suit,
      action or proceeding is improper. Each of the Company and the Purchasers
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing in this Section 9.2
      shall affect or limit any right to serve process in any other manner permitted
      by law.

     

    9.3 Entire
      Agreement; Amendment.
      This
      Agreement and the Transaction Documents contain the entire understanding and
      agreement of the parties with respect to the matters covered hereby and, except
      as specifically set forth herein or in the Transaction Documents, neither the
      Company nor any of the Purchasers makes any representations, warranty, covenant
      or undertaking with respect to such matters and they supersede all prior
      understandings and agreements with respect to said subject matter, all of which
      are merged herein. No provision of this Agreement may be waived or amended
      other
      than by a written instrument signed by the Company and the holders of at least
      seventy-five percent (75%) of the Preferred Shares then outstanding, and no
      provision hereof may be waived other than by an a written instrument signed
      by
      the party against whom enforcement of any such amendment or waiver is sought.
      No
      such amendment shall be effective to the extent that it applies to less than
      all
      of the holders of the Preferred Shares then outstanding. No consideration shall
      be offered or paid to any person to amend or consent to a waiver or modification
      of any provision of any of the Transaction Documents unless the same
      consideration is also offered to all of the parties to the Transaction Documents
      or holders of Preferred Shares, as the case may be.

     

    9.4 Notices.
      Any
      notice, demand, request, waiver or other communication required or permitted
      to
      be given hereunder shall be in writing and shall be effective (a) upon hand
      delivery or delivery by telex (with correct answer back received), e-mail or
      facsimile at the address or number designated below (if delivered on a business
      day during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be received)
      or (b) on the second business day following the date of mailing by express
      courier service, fully prepaid, addressed to

    

    
      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

    

    

    such
      address, or upon actual receipt of such mailing, whichever shall first occur.
      The addresses for such communications shall be:

     

    
      	
              If
                to the Company:

            	
              BPO
                Management Services, Inc.

              1290
                N. Hancock, Ste 202

              Anaheim,
                CA 92807

              Attention:
                Chief Executive Officer

              Tel.
                No.: (714) 974-2670

              Fax
                No.: (714) 974-4771

              E-mail:
                patrick.dolan@bpoms.com

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

            	
              Bryan
                Cave LLP

              1900
                Main Street, Suite 700

              Irvine,
                CA 92614

              Attention:
                Randolf W. Katz, Esq.

              Tel.
                No.: (949) 223-7103

              Fax
                No.: (949) 223-7100

              E-mail:
                rwkatz@bryancave.com

            
	
              and:

            	 
	 	
              Cornman
                & Swartz

              19800
                MacArthur Blvd., Suite 820

              Irvine,
                CA 92612

              Attention:
                Jack T. Cornman, Esq.

              Tel.
                No.: (949) 224-1500

              Fax
                No.: (949) 224-1505

            
	 	 
	
              If
                to any Purchaser:

            	
              At
                the address of such Purchaser set forth on Exhibit
                A
                to
                this Agreement, with copies to Purchaser's counsel as set forth on
                Exhibit
                A
                or
                as specified in writing by such Purchaser

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

            	
              Sheppard,
                Mullin, Richter & Hampton LLP

              333
                S. Hope Street, 48th Floor

              Los
                Angeles, CA 90071

              Attention:
                David I. Sunkin, Esq.

              Tel
                No.: (213) 620-1780

              Fax
                No.: (213) 443-2750

              E-mail:
                dsunkin@sheppardmullin.com

            
	 	 

    

    Any
      party
      hereto may from time to time change its address for notices by giving at least
      ten (10) days' written notice of such changed address to the other party
      hereto.

     

    9.5 Waivers.
      No
      waiver by either party of any default with respect to any provision, condition
      or requirement of this Agreement shall be deemed to be a continuing waiver
      in
      the future or a

    

    
      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

    

    

    waiver
      of
      any other provisions, condition or requirement hereof, nor shall any delay
      or
      omission of any party to exercise any right hereunder in any manner impair
      the
      exercise of any such right accruing to it thereafter.

     

    9.6 Headings.
      The
      article, section and subsection headings in this Agreement are for convenience
      only and shall not constitute a part of this Agreement for any other purpose
      and
      shall not be deemed to limit or affect any of the provisions
      hereof.

     

    9.7 Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and assigns.

     

    9.8 No
      Third Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    9.9 Governing
      Law.
      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.

     

    9.10 Survival.
      The
      representations and warranties of the Company and the Purchasers shall survive
      the execution and delivery hereof and the Closing until the second anniversary
      of the Closing Date, except the agreements and covenants set forth in
Articles
      I, III, V, VI, VII, VIII
      and
IX
      of this
      Agreement shall survive the execution and delivery hereof and the Closing
      hereunder, provided, that the covenants set forth in Article III of this
      Agreement which contain a term shall so survive only until expiration of said
      term..

     

    9.11 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
      hereto, it being understood that all parties need not sign the same counterpart.
      In the event that any signature is delivered by facsimile 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 signature were the original thereof.

    

    
      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

    

    

    9.12 Publicity.
      The
      Company agrees that it will not disclose, and will not include in any public
      announcement, the name of the Purchasers without the consent of the Purchasers
      unless and until such disclosure is required by law or applicable regulation,
      and then only to the extent of such requirement.

     

    9.13 Severability.
      The
      provisions of this Agreement and the Transaction Documents are severable and,
      in
      the event that any court of competent jurisdiction shall determine that any
      one
      or more of the provisions or part of the provisions contained in this Agreement
      or the Transaction Documents shall, for any reason, be held to be invalid,
      illegal or unenforceable in any respect, such invalidity, illegality or
      unenforceability shall not affect any other provision or part of a provision
      of
      this Agreement or the Transaction Documents and such provision shall be reformed
      and construed as if such invalid or illegal or unenforceable provision, or
      part
      of such provision, had never been contained herein, so that such provisions
      would be valid, legal and enforceable to the maximum extent
      possible.

     

    9.14 Further
      Assurances.
      From
      and after the date of this Agreement, upon the request of any Purchaser or
      the
      Company, each of the Company and the Purchasers shall execute and deliver such
      instrument, documents and other writings as may be reasonably necessary or
      desirable to confirm and carry out and to effectuate fully the intent and
      purposes of this Agreement, the Preferred Shares, the Conversion Shares, the
      Warrants, the Warrant Shares, the Certificate of Designation, and the
      Registration Rights Agreement.

     

    9.15 2007
      Stock Incentive Plan.
      The
      Purchasers hereby acknowledge and agree that the Company shall have the right
      to
      establish a stock incentive plan (the "Plan"),
      approved by the Board of Directors, including the approval of the Series D
      Director, for the benefit of the current and future management of the Company
      and its subsidiaries pursuant to which Four Million Six Hundred Thousand
      (4,666,667) shares of Common Stock may be issued, provided that options to
      purchase up to an aggregate Two Million Three Hundred Thousand (2,333,334)
      shares of the Common Stock available for issuance under the Plan shall be
      granted (including options to purchase Common Stock) to Patrick Dolan and James
      Cortens. The vesting provisions of stock options pursuant to the Plan shall
      be
      on terms no more favorable than the Company’s normal vesting provisions for
      awards of stock options to its key employees generally; provided that two-thirds
      of the shares covered by options issued as permitted herein shall not vest
      until
      expiration of the Financial Covenant Period.

     

     

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed by their respective authorized officer as of the date first above
      written.

     

    
      	 	
              BPO
                MANAGEMENT SERVICES, INC.

            
	 	 
	 	 
	 	
              By: 
                /s/ Patrick A. Dolan

              
                

              

            
	 	
              Name: 
                Patrick A. Dolan

              Title: 
                Chairman and CEO

            
	 	 
	 	
              VISION
                OPPORTUNITY MASTER FUND, LTD.

            
	 	 
	 	 
	 	 
	 	
              By: 
                /s/ Adam Benowitz

              
                
                  

                

              

              Name: 
                Adam Benowitz

              Title: 
                Portfolio Manager

            
	 	 
	 	
              RENAISSANCE
                CAPITAL GROWTH & INCOME FUND III, INC.

            
	 	 
	 	 
	 	 
	 	
              By: 
                /s/ Russell Cleveland

              
                
                  

                

              

              Russell
                Cleveland

              President

            
	 	 
	 	
              RENAISSANCE
                US GROWTH INVESTMENT TRUST PLC

            
	 	 
	 	 
	 	 
	 	
              By: 
                /s/ Russell Cleveland

              
                
                  

                

              

              Russell
                Cleveland

              President
                and Director

            
	 	 
	 	
              US
                SPECIAL OPPORTUNITIES TRUST PLC

            
	 	 
	 	 
	 	 
	 	
              By: 
                /s/ Russell Cleveland
                
                  

                

              

              Russell
                Cleveland

              US
                Portfolio Manager

            

    

     

    

      
        
          
            
              	
                      [SIGNATURE
                        PAGE TO SECURITIES PURCHASE AGREEMENT]

                    
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

       

    

    
      	 	 
	 	
              PREMIER
                RENN US EMERGING GROWTH FUND LTD.

            
	 	 
	 	 
	 	 
	 	
              By: 
                /s/ Russell Cleveland
                
                  

                

              

              Russell
                Cleveland

              President

            
	 	 
	 	
              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 SECURITIES PURCHASE AGREEMENT]

                    
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      A to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

     

    BPO
      MANAGEMENT SERVICES, INC.

     

    
      	
              Legal
                Entity Name and Address of Purchaser

            	 	
              Number
                of Preferred Shares & Warrants
                Purchased

            	 	
              Dollar
                Amount of Investment

            
	
              VISION
                OPPORTUNITY MASTER FUND, LTD.

            	 	
              Preferred
                Shares: 708,333.4

            	 	
              $
                6,800,000.00 

            
	
              20
                W. 55th Street, 5th floor 

            	 	
              Series
                A Warrants: 5,666,667

            	 	 
	
              New
                York, NY 10019 

            	 	
              Series
                B Warrants: 11,333,334

            	 	 
	
              Tel:
                Fax: 212-867-1416

            	 	
              Series
                J Warrants: 708,333.4

            	 	 
	
              Attn:
                Adam Benowitz and Antti Uusiheimala

            	 	
              Series
                C Warrants: 5,666,667

            	 	 
	
              E-mail:
                adam@visicap.com & antti@visicap.com

            	 	
              Series
                D Warrants: 11,333,334

            	 	 
	 	 	 	 	 
	
              RENAISSANCE
                US GROWTH INVESTMENT TRUST PLC ("RUSGIT")

            	 	
              Preferred
                Shares: 130,208.4

            	 	
              $
                1,250,000.00 

            
	
              Frost
                National Bank

            	 	
              Series
                A Warrants: 1,041,667

            	 	 
	
              100
                W. Houston Street

            	 	
              Series
                B Warrants: 2,083,334

            	 	 
	
              ATTN:
                Henri Domingues T-8

            	 	
              Series
                J Warrants: 130,208.4

            	 	 
	
              San
                Antonio, TX 78205

            	 	
              Series
                C Warrants: 1,041,667

            	 	 
	
              Contact
                for docs: Eric Stephens

            	 	
              Series
                D Warrants: 2,083,334

            	 	 
	
              Tel:
                (214) 891-8046/ Fax: 

            	 	 	 	 
	
              Email:
                estephens@rencapital.com

            	 	 	 	 
	 	 	 	 	 
	
              RENAISSANCE
                CAPITAL GROWTH & INCOME FUND III, INC. ("RENN3")
                

            	 	
              Preferred
                Shares: 104,166.7

            	 	
              $
                1,000,000.00 

            
	
              Frost
                National Bank

            	 	
              Series
                A Warrants: 833,334

            	 	 
	
              100
                W. Houston Street

            	 	
              Series
                B Warrants: 1,666,667

            	 	 
	
              ATTN:
                Henri Domingues T-8

            	 	
              Series
                J Warrants: 104,166.7

            	 	 
	
              San
                Antonio, TX 78205

            	 	
              Series
                C Warrants: 833,334

            	 	 
	
              Contact
                for docs: Eric Stephens

            	 	
              Series
                D Warrants: 1,666,667

            	 	 
	
              Tel:
                (214) 891-8046/ Fax: 

            	 	 	 	 
	
              Email:
                estephens@rencapital.com

            	 	 	 	 
	 	 	 	 	 
	
              US
                SPECIAL OPPORTUNITIES TRUST PLC ("USSO")

            	 	
              Preferred
                Shares: 130,208.4

            	 	
              $
                1,250,000.00 

            
	
              Frost
                National Bank

            	 	
              Series
                A Warrants: 1,041,667

            	 	 
	
              100
                W. Houston Street

            	 	
              Series
                B Warrants: 2,083,334

            	 	 
	
              ATTN:
                Henri Domingues T-8

            	 	
              Series
                J Warrants: 130,208.4

            	 	 
	
              San
                Antonio, TX 78205

            	 	
              Series
                C Warrants: 1,041,667

            	 	 
	
              Contact
                for docs: Eric Stephens

            	 	
              Series
                D Warrants: 2,083,334

            	 	 
	
              Tel:
                (214) 891-8046/ Fax: 

            	 	 	 	 
	
              Email:
                estephens@rencapital.com

            	 	 	 	 

    

     

    
      
        
          
            
              
                	 	
                        EXHIBIT
                          A

                      	 
	 	 	 

              

            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
               

            

          

        

      

    

     

    
      	 	 	 	 	 
	
              PREMIER
                RENN US EMERGING GROWTH FUND LTD.
                ("PREMIER")

            	 	
              Preferred
                Shares: 52,083.4

            	 	
              $
                500,000.00 

            
	
              Premier
                RENN US Emerging Growth Fund Ltd.

            	 	
              Series
                A Warrants: 416,667

            	 	 
	
              Acct
                # PRN01/17-28085

            	 	
              Series
                B Warrants: 833,334

            	 	 
	
              c/o
                Cristina Ramones

            	 	
              Series
                J Warrants: 52,083.4

            	 	 
	
              The
                Northern Trust Company

            	 	
              Series
                C Warrants: 416,667

            	 	 
	
              801
                South Canal Street, C-1-North

            	 	
              Series
                D Warrants: 833,334

            	 	 
	
              Chicago,
                IL 60607 

            	 	 	 	 
	
              Contact
                for docs: Eric Stephens

            	 	 	 	 
	
              Tel:
                (214) 891-8046/ Fax: 

            	 	 	 	 
	
              Email:
                estephens@rencapital.com

            	 	 	 	 
	 	 	 	 	 
	
              BRIDGEPOINTE
                MASTER FUND LTD.

            	 	
              Preferred
                Shares: 208,333.4

            	 	
              $
                2,000,000.00 

            
	
              1120
                Sanctuary Parkway, Suite 325 

            	 	
              Series
                A Warrants: 1,666,667

            	 	 
	
              Alpharetta,
                GA 30004

            	 	
              Series
                B Warrants: 3,333,334

            	 	 
	
              Contact
                for docs: Brad Hathorn

            	 	
              Series
                J Warrants: 208,333.4

            	 	 
	
              Tel:
                770-640-8130 ext 120 Fax: 770.777.5844

            	 	
              Series
                C Warrants: 1,666,667

            	 	 
	
              Email:
                bradhathorn@roswellcapitalpartners.com

            	 	
              Series
                D Warrants: 3,333,334

            	 	 
	 	 	 	 	 
	
              HELLER
                CAPITAL INVESTMENTS LLC

            	 	
              Preferred
                Shares: 125,000.1

            	 	
              $
                1,200,000.00 

            
	
              700
                E. Palisade Ave

            	 	
              Series
                A Warrants: 1,000,001

            	 	 
	
              Englewood
                Cliffs, NJ 07632

            	 	
              Series
                B Warrants: 2,000,001

            	 	 
	
              Contacts
                for docs: Steven Hart

            	 	
              Series
                J Warrants: 125,000.1

            	 	 
	
              Tel:
                201-816-4235/ Fax: 201-569-5014

            	 	
              Series
                C Warrants: 1,000,001

            	 	 
	
              Email:
                shart@hellercapitalpartners.com

            	 	
              Series
                D Warrants: 2,000,001

            	 	 

    

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        A

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      B to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF CERTIFICATE OF DESIGNATION

     

     

    

      
        
          
            
              	 	
                      EXHIBIT
                        B

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      B-2 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES D-2 CERTIFICATE OF DESIGNATION

     

     

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        B-2

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      C-1 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES A WARRANT

     

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        C-1

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      C-2 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES B WARRANT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        C-2

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

    

    EXHIBIT
      C-3 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES J WARRANT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        C-3

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      C-4 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES C WARRANT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        C-4

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      C-5 to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF SERIES D WARRANT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        C-5

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      D to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF REGISTRATION RIGHTS AGREEMENT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        D

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      E to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF LOCK-UP AGREEMENT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        E

                    	 
	 	 	 

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      F to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF ESCROW AGREEMENT

     

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        F

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      G to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF IRREVOCABLE TRANSFER AGENT INSTRUCTIONS

     

    BPO
      MANAGEMENT SERVICES, INC.

     

    as
      of
      June __, 2007

     

    [Name
      and
      address of Transfer Agent]

     

    Attn:
      _____________

     

    Ladies
      and Gentlemen:

     

    Reference
      is made to that certain Series D Convertible Preferred Stock Purchase Agreement
      (the "Purchase
      Agreement"),
      dated
      as of June __, 2007, by and among BPO Management Services, Inc., a Delaware
      corporation (the "Company"),
      and
      the purchasers named therein (collectively, the "Purchasers")
      pursuant to which the Company is issuing to the Purchasers shares of its Series
      D Convertible Preferred Stock, par value $0.01 per share, (the "Preferred
      Shares")
      and
      warrants (the "Warrants")
      to
      purchase shares of the Company's common stock, par value $0.01 per share (the
      "Common
      Stock").
      This
      letter shall serve as our irrevocable authorization and direction to you
      provided that you are the transfer agent of the Company at such time) to issue
      shares of Common Stock upon conversion of the Preferred Shares (the
      "Conversion
      Shares")
      and
      exercise of the Warrants (the "Warrant
      Shares")
      to or
      upon the order of a Purchaser from time to time upon (i) surrender to you of
      a
      properly completed and duly executed Conversion Notice or Exercise Notice,
      as
      the case may be, in the form attached hereto as Exhibit I and Exhibit II,
      respectively, (ii) in the case of the conversion of Preferred Shares, a copy
      of
      the certificates (with the original certificates delivered to the Company)
      representing Preferred Shares being converted or, in the case of Warrants being
      exercised, a copy of the Warrants (with the original Warrants delivered to
      the
      Company) being exercised (or, in each case, an indemnification undertaking
      with
      respect to such share certificates or the warrants in the case of their loss,
      theft or destruction), and (iii) delivery of a treasury order or other
      appropriate order duly executed by a duly authorized officer of the Company.
      So
      long as you have previously received (x) written confirmation from counsel
      to
      the Company that a registration statement covering resales of the Conversion
      Shares or Warrant Shares, as applicable, has been declared effective by the
      Securities and Exchange Commission (the "SEC")
      under
      the Securities Act of 1933, as amended (the "1933
      Act"),
      and
      no subsequent notice by the Company or its counsel of the suspension or
      termination of its effectiveness and (y) a copy of such registration statement,
      and if the Purchaser represents in writing that the Conversion Shares or the
      Warrant Shares, as the case may be, were sold pursuant to the Registration
      Statement, then certificates representing the Conversion Shares and the Warrant
      Shares, as the case may be, shall not bear any legend restricting transfer
      of
      the Conversion Shares and the Warrant Shares, as the case may be, thereby and
      should not be subject to any stop-transfer restriction. Provided, however,
      that
      if you have not previously received those items and representations listed
      above, then the certificates for the Conversion Shares and the Warrant Shares
      shall bear the following legend:

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    "THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT"), OR ANY STATE
      SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
      REGISTERED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS, OR
      BPO
      MANAGEMENT SERVICES, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
      REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
      PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED."

     

    and,
      provided further, that the Company may from time to time notify you to place
      stop-transfer restrictions on the certificates for the Conversion Shares and
      the
      Warrant Shares in the event a registration statement covering the Conversion
      Shares and the Warrant Shares is subject to amendment for events then
      current.

     

    A
      form of
      written confirmation from counsel to the Company that a registration statement
      covering resales of the Conversion Shares and the Warrant Shares has been
      declared effective by the SEC under the 1933 Act is attached hereto as Exhibit
      III.

     

    Please
      be
      advised that the Purchasers are relying upon this letter as an inducement to
      enter into the Purchase Agreement and, accordingly, each Purchaser is a third
      party beneficiary to these instructions.

     

    Please
      execute this letter in the space indicated to acknowledge your agreement to
      act
      in accordance with these instructions. Should you have any questions concerning
      this matter, please contact me at ___________.

     

    Very
      truly yours,

     

     

    BPO
      MANAGEMENT SERVICES, INC.

     

     

    By:

      
        

      

    

    Name:

    Title:

     

    ACKNOWLEDGED
      AND AGREED:

     

    [TRANSFER
      AGENT]

     

    By: 
      
      
        

      

    

    Name:

    Title:

    Date:

    

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        G

                    	 
	 	 	 

            

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
            

          

        

      

    

    

    EXHIBIT
      I

     

    BPO
      MANAGEMENT SERVICES, INC.

     

    CONVERSION
      NOTICE

     

    Reference
      is made to the Certificate of Designation of the Relative Rights and Preferences
      of the Series D Convertible Preferred Stock of BPO Management Services, Inc.
      (the "Certificate of Designation"). In accordance with and pursuant to the
      Certificate of Designation, the undersigned hereby elects to convert the number
      of shares of Series D Convertible Preferred Stock, par value $0.01 per share
      (the "Preferred Shares"), of BPO Management Services, Inc., a Delaware
      corporation (the "Company"), indicated below into shares of Common Stock, par
      value $0.01 per share (the "Common Stock"), of the Company, by tendering the
      stock certificate(s) representing the share(s) of Preferred Shares specified
      below as of the date specified below.

     

    Date
      of
      Conversion:  ________________________________________________

     

    Number
      of
      Preferred Shares to be converted: ______________________________

     

    Stock
      certificate no(s). of Preferred Shares to be converted:
      ___________________

     

    The
      Common Stock have been sold pursuant to the Registration Statement (as defined
      in the Registration Rights Agreement): YES ____ NO____

     

    Please
      confirm the following information:

     

    Conversion
      Price:
      ________________________________________________________________

     

    Number
      of
      shares of Common Stock to
      be
      issued:  _______________________________________

     

    Number
      of
      shares of Common Stock beneficially owned or deemed beneficially owned by the
      Holder on the Date of Conversion: _________________________

     

    Please
      issue the Common Stock into which the Preferred Shares are being converted
      and,
      if applicable, any check drawn on an account of the Company in the following
      name and to the following address:

     

    Issue
      to:
      ___________________________________________________________

     

     

     

    Facsimile
      Number: ____________________________________________________

     

    Authorization:
      _______________________________________________________

     

    By: 
      ___________________________________________________

    Title:
      __________________________________________________

     

    Dated:
       

     

    

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        G

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

    

    EXHIBIT
      II

     

    FORM
      OF EXERCISE NOTICE

     

    EXERCISE
      FORM

     

    BPO
      MANAGEMENT SERVICES, INC.

     

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

     

    Dated:
      _________________

    Signature 
      ___________________________

    Address 
      ____________________________

    ____________________________________

     

    Number
      of
      shares of Common Stock beneficially owned or deemed beneficially owned by the
      Holder on the date of Exercise: _________________________

     

    ASSIGNMENT

     

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

     

    Dated:
      _________________

    Signature
      ___________________________

    Address
      ____________________________

    ___________________________________

     

    PARTIAL
      ASSIGNMENT

     

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

     

    Dated:
      _________________ 

    Signature
      __________________________

    Address
      ___________________________

    __________________________________

     

     

    FOR
      USE
      BY THE ISSUER ONLY:

     

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

     

    

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        G

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

    

    EXHIBIT
      III

     

    FORM
      OF NOTICE OF EFFECTIVENESS

     

    OF
      REGISTRATION STATEMENT

     

    [Name
      and
      address of Transfer Agent]

     

    Attn:
      _____________

     

    Re: BPO
      Management Services, Inc.

     

    Ladies
      and Gentlemen:

     

    We
      are
      counsel to BPO Management Services, Inc., a Delaware corporation (the
      "Company"),
      and
      have represented the Company in connection with that certain Series D
      Convertible Preferred Stock Purchase Agreement (the "Purchase
      Agreement"),
      dated
      as of June __, 2007, by and among the Company and the purchasers named therein
      (collectively, the "Purchasers")
      pursuant to which the Company issued to the Purchasers shares of its Series
      D
      Convertible Preferred Stock, par value $0.01 per share, (the "Preferred
      Shares")
      and
      warrants (the "Warrants")
      to
      purchase shares of the Company's common stock, par value $0.01 per share (the
      "Common
      Stock").
      Pursuant to the Purchase Agreement, the Company has also entered into a
      Registration Rights Agreement with the Purchasers (the "Registration
      Rights Agreement"),
      dated
      as of June __, 2007, pursuant to which the Company agreed, among other things,
      to register the Registrable Securities (as defined in the Registration Rights
      Agreement), including the shares of Common Stock issuable upon conversion of
      the
      Preferred Shares and exercise of the Warrants, under the Securities Act of
      1933,
      as amended (the "1933
      Act").
      In
      connection with the Company's obligations under the Registration Rights
      Agreement, on ________________, 2007, the Company filed a Registration Statement
      on Form SB-2 (File No. 333-________) (the "Registration
      Statement")
      with
      the Securities and Exchange Commission (the "SEC")
      relating to the resale of the Registrable Securities which names each of the
      present Purchasers as a selling stockholder thereunder.

     

    In
      connection with the foregoing, we advise you that a member of the SEC's staff
      has advised us by telephone that the SEC has entered an order declaring the
      Registration Statement effective under the 1933 Act at [ENTER
      TIME OF EFFECTIVENESS]
      on
[ENTER
      DATE OF EFFECTIVENESS]
      and we
      have no knowledge, after telephonic inquiry of a member of the SEC's staff,
      that
      any stop order suspending its effectiveness has been issued or that any
      proceedings for that purpose are pending before, or threatened by, the SEC
      and
      accordingly, the Registrable Securities are available for resale under the
      1933
      Act pursuant to the Registration Statement.

     

    Very
      truly yours,

     

    [COMPANY
      COUNSEL]

     

     

    By: 
      

    
      
        

      

    

     

    cc: [LIST
      NAMES OF PURCHASERS]

     

    

     

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        G

                    	 
	 	 	 

            

            

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      H to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF OPINION OF COUNSEL

     

    1. The
      Company is a corporation duly incorporated, validly existing and in good
      standing under the laws of the State of Delaware and has the requisite corporate
      power to own, lease and operate its properties and assets, and to carry on
      its
      business as presently conducted. The Company is duly qualified as a foreign
      corporation to do business and is in good standing in every jurisdiction in
      which the nature of the business conducted or property owned by it makes such
      qualification necessary.

     

    2. The
      Company has the requisite corporate power and authority to enter into and
      perform its obligations under the Transaction Documents and to issue the
      Preferred Stock, the Warrants and the Common Stock issuable upon conversion
      of
      the Preferred Stock and exercise of the Warrants. The execution, delivery and
      performance of each of the Transaction Documents by the Company and the
      consummation by it of the transactions contemplated thereby have been duly
      and
      validly authorized by all necessary corporate action and no further consent
      or
      authorization of the Company or its Board of Directors or stockholders is
      required. Each of the Transaction Documents have been duly executed and
      delivered, and the Preferred Stock and the Warrants have been duly executed,
      issued and delivered by the Company and each of the Transaction Documents
      constitutes a legal, valid and binding obligation of the Company enforceable
      against the Company in accordance with its respective terms. The Common Stock
      issuable upon conversion of the Preferred Stock and exercise of the Warrants
      are
      not subject to any preemptive rights under the Certificate of Incorporation
      or
      the Bylaws.

     

    3. The
      Preferred Stock and the Warrants have been duly authorized and, when delivered
      against payment in full as provided in the Purchase Agreement, will be validly
      issued, fully paid and nonassessable. The shares of Common Stock issuable upon
      conversion of the Preferred Stock and exercise of the Warrants, have been duly
      authorized and reserved for issuance, and, when delivered upon conversion or
      against payment in full as provided in the Certificate of Designation and the
      Warrants, as applicable, will be validly issued, fully paid and
      nonassessable.

     

    4. The
      execution, delivery and performance of and compliance with the terms of the
      Transaction Documents and the issuance of the Preferred Stock, the Warrants
      and
      the Common Stock issuable upon conversion of the Preferred Stock and exercise
      of
      the Warrants do not (i) violate any provision of the Certificate of
      Incorporation or Bylaws, (ii) conflict with, or constitute a default (or an
      event which with notice or lapse of time or both would become a default) under,
      or give to others any rights of termination, amendment, acceleration or
      cancellation of, any material agreement, mortgage, deed of trust, indenture,
      note, bond, license, lease agreement, instrument or obligation to which the
      Company is a party, (iii) create or impose a lien, charge or encumbrance on
      any
      property of the Company under any agreement or any commitment to which the
      Company is a party or by which the Company is bound or by which any of its
      respective properties or assets are bound, or (iv) result in a violation of
      any
      federal, state, local or foreign statute, rule, regulation, order, judgment,
      injunction or decree (including

     

    

      
        
          
            
              	 	
                      EXHIBIT
                        H

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    Federal
      and state securities laws and regulations) applicable to the Company or by
      which
      any property or asset of the Company is bound or affected, except, in all cases
      other than violations pursuant to clauses (i) and (iv) above, for such
      conflicts, default, terminations, amendments, acceleration, cancellations and
      violations as would not, individually or in the aggregate, have a Material
      Adverse Effect.

     

    5. No
      consent, approval or authorization of or designation, declaration or filing
      with
      any governmental authority on the part of the Company is required under Federal,
      state or local law, rule or regulation in connection with the valid execution
      and delivery of the Transaction Documents, or the offer, sale or issuance of
      the
      Preferred Stock, the Warrants or the Common Stock issuable upon conversion
      of
      the Preferred Stock and exercise of the Warrants other than the Certificate
      of
      Designation and the Registration Statement.

     

    6. There
      is
      no action, suit, claim, investigation or proceeding pending or threatened
      against the Company which questions the validity of this Agreement or the
      transactions contemplated hereby or any action taken or to be taken pursuant
      hereto or thereto. There is no action, suit, claim, investigation or proceeding
      pending, or to our knowledge, threatened, against or involving the Company
      or
      any of its properties or assets and which, if adversely determined, is
      reasonably likely to result in a Material Adverse Effect. There are no
      outstanding orders, judgments, injunctions, awards or decrees of any court,
      arbitrator or governmental or regulatory body against the Company or any
      officers or directors of the Company in their capacities as such.

     

    7. The
      offer, issuance and sale of the Preferred Stock and the Warrants and the offer,
      issuance and sale of the shares of Common Stock issuable upon conversion of
      the
      Preferred Stock and exercise of the Warrants pursuant to the Purchase Agreement,
      the Certificate of Designation and the Warrants, as applicable, are exempt
      from
      the registration requirements of the Securities Act.

     

    8. The
      Company is not, and as a result of and immediately upon Closing will not be,
      an
      "investment company" or a company "controlled" by an "investment company,"
      within the meaning of the Investment Company Act of 1940, as
      amended.

     

    Very
      truly yours,

     

    

    

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        H

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      J to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    FORM
      OF J WARRANT SHARES CERTIFICATE OF DESIGNATION

     

     

    
 

    

    
      
        
          
            
              	 	
                      EXHIBIT
                        J

                    	 
	 	 	 

            

             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

    

     

    EXHIBIT
      K to the

    SERIES
      D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT FOR

    BPO
      MANAGEMENT SERVICES, INC.

     

    AMENDED
      FORMS OF CERTIFICATE OF INCORPORATION

     

     

     

     

     

    

      
        
          
            
              	 	
                      EXHIBIT
                        K

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