Document:

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

      

      WARRANT
        TO PURCHASE

      

      SHARES
        OF
        COMMON STOCK

      

      OF

      

      BPO
        MANAGEMENT SERVICES, INC.

      

      Expires
        June 13, 2012

      

      
        	
                No.:
                  W-07-01

              	
                Number
                  of Shares: 700,000

              

      

      Date
        of
        Issuance: June 13, 2007

      

      

      FOR
        VALUE
        RECEIVED, the undersigned, BPO Management Services, Inc., a Delaware corporation
        (together with its successors and assigns, the “Issuer”),
        hereby certifies that C.E. Unterberg, Towbin, Inc. or its permitted, registered
        assigns is entitled to subscribe for and purchase, during the Term (as
        hereinafter defined), up to Seven Hundred Thousand (700,000) shares (subject
        to
        adjustment as hereinafter provided) of the duly authorized, validly issued,
        fully paid and non-assessable Common Stock of the Issuer, at an exercise
        price
        per share equal to the Warrant Price then in effect, subject, however, to
        the
        provisions and upon the terms and conditions hereinafter set forth. Capitalized
        terms used in this Warrant and not otherwise defined herein shall have the
        respective meanings specified in Section 9 hereof.

      

      1. Term.
        The
        term of this Warrant shall commence on June 13, 2007 and shall expire at
        6:00
        p.m., eastern time, on June 13, 2012 (such period being the “Term”).

      

      
        	 	
                2.

              	
                Method
                  of Exercise; Payment; Issuance of New Warrant; Transfer and
                  Exchange.

              

      

      

      (a) Time
        of Exercise.
        The
        purchase rights represented by this Warrant may be exercised in whole or
        in part
        during the Term. 

      

      (b) Method
        of Exercise.
        The
        Holder hereof may exercise this Warrant, in whole or in part, by the surrender
        of this Warrant (with the exercise form attached hereto duly executed) at
        the
        principal office of the Issuer, and by the payment to the Issuer of an amount
        of
        consideration therefor equal to the Warrant Price in effect on the date of
        such
        exercise multiplied by the number of shares of Warrant Stock with respect
        to
        which this Warrant is then being exercised, payable at such Holder’s election
        (i) by certified or official bank check or by
        wire
        transfer to an account designated by the Issuer,
        (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of this
        Section 2, but only when a registration statement under the Securities
        Act

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      providing
        for the resale of the Warrant Stock is not then in effect, or (iii) by a
        combination of the foregoing methods of payment selected by the Holder of
        this
        Warrant.

      

      (c) Cashless
        Exercise.
        Notwithstanding any provisions herein to the contrary and commencing one
        and a
        half (1.5) years following the Original Issue Date if (i) the Per Share Market
        Value of one share of Common Stock is greater than the Warrant Price (at
        the
        date of calculation as set forth below) and (ii) a registration statement
        under
        the Securities Act providing for the resale of the Warrant Stock is not then
        in
        effect by the date such registration statement is required to be effective
        pursuant to the Registration Rights Agreement (as defined in the Purchase
        Agreement) or not effective at any time during the Effectiveness Period (as
        defined in the Registration Rights Agreement) in accordance with the terms
        of
        the Registration Rights Agreement, unless the registration statement is not
        effective as a result of the Issuer exercising its rights under Section 3(n)
        of
        the Registration Rights Agreement, in lieu of exercising this Warrant by
        payment
        of cash, the Holder may exercise this Warrant by a cashless exercise and
        shall
        receive the number of shares of Common Stock equal to an amount (as determined
        below) by surrender of this Warrant at the principal office of the Issuer
        together with the properly endorsed Notice of Exercise in which event the
        Issuer
        shall issue to the Holder a number of shares of Common Stock computed using
        the
        following formula:

      

      X
        = Y -
(A)(Y)

                                      
        B

      

      
        	
                Where

              	
                X
                  =

              	
                the
                  number of shares of Common Stock to be issued to the
                  Holder.

              

      

      

      
        	 	
                Y
                  =

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

              

      

      

      
        	 	
                A
                  =

              	
                the
                  Warrant Price. 

              

      

      

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

              

      

      

      (d) Issuance
        of Stock Certificates.
        In the
        event of any exercise of this Warrant in accordance with and subject to the
        terms and conditions hereof, certificates for the shares of Warrant Stock
        so
        purchased shall be dated the date of such exercise and delivered to the Holder
        hereof within a reasonable time, not exceeding three (3) Trading Days after
        such
        exercise (the “Delivery
        Date”)
        or, at
        the request of the Holder (provided that a registration statement under the
        Securities Act providing for the resale of the Warrant Stock is then in effect),
        issued and delivered to the Depository Trust Company (“DTC”)
        account on the Holder’s behalf via the Deposit Withdrawal Agent Commission
        System (“DWAC”)
        within
        a reasonable time, not exceeding three (3) Trading Days after such exercise,
        and
        the Holder hereof shall be deemed for all purposes to be the holder of the
        shares of Warrant Stock so purchased as of the date of such exercise.
        Notwithstanding the foregoing to the contrary, the Issuer or its transfer
        agent
        shall only be obligated to issue and deliver the shares to the DTC on a holder’s
        behalf via DWAC if such exercise is in connection with a sale and the
        Issuer and its transfer agent are participating in DTC through the DWAC
        system.
        The
        Holder shall deliver this original Warrant, or an indemnification undertaking
        with respect to such Warrant in the case of its loss, theft or destruction,
        at
        such time that this Warrant is fully exercised. With respect to partial
        exercises of this Warrant, the Issuer shall keep written records of the number
        of shares of Warrant Stock exercised as of each date of
        exercise.

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

      (e) Reserved.

       

      (f) Transferability
        of Warrant.
        Subject
        to Section 2(h) hereof, this Warrant may be transferred by a Holder, in whole
        or
        in part, without the consent of the Issuer; provided,
        however,
        that
        the original Holder shall neither (i) transfer, assign, dispose of, pledge,
        hypothecate, or sell this Warrant or the Warrant Stock at any time prior
        to the
        first anniversary of the Original Issue Date nor (ii) subject the Warrant
        or the
        Warrant Stock to any hedging, short sale, derivative, put or call transaction
        during such period. If transferred pursuant to this paragraph, this Warrant
        may
        be transferred on the books of the Issuer by the Holder hereof in person
        or by
        duly authorized attorney, upon surrender of this Warrant at the principal
        office
        of the Issuer, properly endorsed (by the Holder executing an assignment in
        the
        form attached hereto) and upon payment of any necessary transfer tax or other
        governmental charge imposed upon such transfer. This Warrant is exchangeable
        at
        the principal office of the Issuer for Warrants to purchase the same aggregate
        number of shares of Warrant Stock, each new Warrant to represent the right
        to
        purchase such number of shares of Warrant Stock as the Holder hereof shall
        designate at the time of such exchange. All Warrants issued on transfers
        or
        exchanges shall be dated the Original Issue Date and shall be identical with
        this Warrant except as to the number of shares of Warrant Stock issuable
        pursuant thereto.

      

      (g) Continuing
        Rights of Holder.
        The
        Issuer will, at the time of or at any time after each exercise of this Warrant,
        upon the request of the Holder hereof, acknowledge in writing the extent,
        if
        any, of its continuing obligation to afford to such Holder all rights to
        which
        such Holder shall continue to be entitled after such exercise in accordance
        with
        the terms of this Warrant, provided
        that if
        any such Holder shall fail to make any such request, the failure shall not
        affect the continuing obligation of the Issuer to afford such rights to such
        Holder.

      

      (h) Compliance
        with Securities Laws.

      

      (i) The
        Holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
        and
        the shares of Warrant Stock to be issued upon exercise hereof are being acquired
        solely for the Holder’s own account and not as a nominee for any other party,
        and for investment, and that the Holder will not offer, sell or otherwise
        dispose of this Warrant or any shares of Warrant Stock to be issued upon
        exercise hereof except pursuant to an effective registration statement, or
        an
        exemption from registration, under the Securities Act and any applicable
        state
        securities laws.

      

      (ii) Except
        as
        provided in paragraph (iii) below, this Warrant and all certificates
        representing shares of Warrant Stock issued upon exercise hereof shall be
        stamped or imprinted with a legend in substantially the following
        form:

      

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

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

      

      (iii) The
        Issuer agrees to reissue this Warrant or certificates representing any of
        the
        Warrant Stock, without the legend set forth above if at such time, prior
        to
        making any transfer of any such securities, the Holder shall give written
        notice
        to the Issuer describing the manner and terms of such transfer. Such proposed
        transfer will not be effected until: (a) either (i) the Issuer has received
        an
        opinion of counsel reasonably satisfactory to the Issuer, to the effect that
        the
        registration of such securities under the Securities Act is not required
        in
        connection with such proposed transfer, (ii) a registration statement under
        the
        Securities Act covering such proposed disposition has been filed by the Issuer
        with the Securities and Exchange Commission and has become effective under
        the
        Securities Act and the Holder has represented that the Warrant Stock has
        been or
        will be sold, (iii) the Issuer has received other evidence reasonably
        satisfactory to the Issuer that such registration and qualification under
        the
        Securities Act and state securities laws are not required, or (iv) the Holder
        provides the Issuer with reasonable assurances that such security can be
        sold
        pursuant to Rule 144 under the Securities Act; and (b) either (i) the Issuer
        has
        received an opinion of counsel reasonably satisfactory to the Issuer, to
        the
        effect that registration or qualification under the securities or “blue sky”
laws of any state is not required in connection with such proposed disposition,
        or (ii) compliance with applicable state securities or “blue sky” laws has been
        effected or a valid exemption exists with respect thereto. The Issuer will
        respond to any such notice from a holder within five (5) Trading Days. In
        the
        case of any proposed transfer under this Section 2(h), the Issuer will use
        reasonable efforts to comply with any such applicable state securities or
“blue
        sky” laws, but shall in no event be required, (x) to qualify to do business in
        any state where it is not then qualified, (y) to take any action that would
        subject it to tax or to the general service of process in any state where
        it is
        not then subject, or (z) to comply with state securities or “blue sky” laws of
        any state for which registration by coordination is unavailable to the Issuer.
        The restrictions on transfer contained in this Section 2(h) shall be in addition
        to, and not by way of limitation of, any other restrictions on transfer
        contained in any other section of this Warrant. Whenever
        a
        certificate representing the Warrant Stock is required to be issued to a
        the
        Holder without a legend, in lieu of delivering physical certificates
        representing the Warrant Stock, the Issuer shall use its reasonable best
        efforts
        to cause its transfer agent to electronically transmit the Warrant Stock
        to the
        Holder by crediting the account of the Holder’s Prime Broker with DTC through
        its DWAC system (to the extent not inconsistent with any provisions of this
        Warrant).
        Notwithstanding the foregoing to the contrary, the Issuer or its transfer
        agent
        shall only be obligated to issue and deliver the shares to the DTC on a holder’s
        behalf via DWAC if such exercise is in connection with a sale and the
        Issuer and its transfer agent are participating in DTC through the DWAC
        system.
        

      

      (i) Accredited
        Investor Status.
        In no
        event may the Holder exercise this Warrant in whole or in part unless the
        Holder
        is then an “accredited investor” as defined in Regulation D under the Securities
        Act. 

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

       

      3. Stock
        Fully Paid; Reservation and Listing of Shares; Covenants.

      

      (a) Stock
        Fully Paid.
        The
        Issuer represents, warrants, covenants and agrees that all shares of Warrant
        Stock which may be issued upon the exercise of this Warrant or otherwise
        hereunder will, when issued in accordance with the terms of this Warrant,
        be
        duly authorized, validly issued, fully paid and nonassessable and free from
        all
        taxes, liens and charges created by or through the Issuer. 

      

      (b) Reservation.
        If any
        shares of Common Stock required to be reserved for issuance upon exercise
        of
        this Warrant or as otherwise provided hereunder require registration or
        qualification with any Governmental Authority under any federal or state
        law
        before such shares may be so issued, the Issuer will in good faith, and within
        the limits of any contractual restrictions imposed upon the Issuer by any
        third
        parties, use its best efforts as expeditiously as possible at its expense
        to
        cause such shares to be duly registered or qualified. If the Issuer shall
        list
        any shares of Common Stock on any securities exchange or market it will,
        at its
        expense, list thereon, maintain and increase when necessary such listing,
        of,
        all shares of Warrant Stock from time to time issued upon exercise of this
        Warrant or as otherwise provided hereunder (provided that such Warrant Stock
        has
        been registered pursuant to a registration statement under the Securities
        Act
        then in effect), and, to the extent permissible under the applicable securities
        exchange rules, all unissued shares of Warrant Stock which are at any time
        issuable hereunder, so long as any shares of Common Stock shall be so listed.
        The Issuer will also so list on each securities exchange or market, and will
        maintain such listing of, any other securities which the Holder of this Warrant
        shall be entitled to receive upon the exercise of this Warrant if at the
        time
        any securities of the same class shall be listed on such securities exchange
        or
        market by the Issuer.

      

      (c) Covenants.
        The
        Issuer shall not by any action including, without limitation, amending the
        Certificate of Incorporation or the by-laws of the Issuer, or through any
        reorganization, transfer of assets, consolidation, merger, dissolution, issue
        or
        sale of securities or any other action, avoid or seek to avoid the observance
        or
        performance of any of the terms of this Warrant, but will at all times in
        good
        faith assist in the carrying out of all such terms and in the taking of all
        such
        actions as may be necessary or appropriate to protect the rights of the Holder
        hereof against dilution (to the extent specifically provided herein) or
        impairment. Without limiting the generality of the foregoing, the Issuer
        will
        (i) not permit the par value, if any, of its Common Stock to exceed the then
        effective Warrant Price, (ii) not amend or modify any provision of the
        Certificate of Incorporation or by-laws of the Issuer in any manner that
        would
        adversely affect the rights of the Holder of this Warrant, (iii) take all
        such
        action as may be reasonably necessary in order that the Issuer may validly
        and
        legally issue fully paid and nonassessable shares of Common Stock, free and
        clear of any liens, claims, encumbrances and restrictions (other than as
        provided herein) upon the exercise of this Warrant, and (iv)
        use
        its best efforts to obtain all such authorizations, exemptions or consents
        (within the limits of any contractual restrictions imposed upon the Issuer
        by
        any third parties) from any public regulatory body having jurisdiction thereof
        as may be reasonably necessary to enable the Issuer to perform its obligations
        under this Warrant.

      

      (d) Loss,
        Theft, Destruction of Warrant.
        Upon
        receipt of evidence satisfactory to the Issuer of the ownership of and the
        loss,
        theft, destruction or mutilation of this Warrant and, in the case of any
        such
        loss, theft or destruction, upon receipt of indemnity or security satisfactory
        to the Issuer or, in the case of any such mutilation, upon surrender and
        cancellation of this Warrant, the Issuer will make and deliver, in lieu of
        such
        lost, stolen, destroyed or mutilated Warrant, a

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

      new
        Warrant of like tenor and representing the right to purchase the same number
        of
        shares of Common Stock.

      

      4. Adjustment
        of Warrant Price and Number of Shares Issuable Upon Exercise.
        The
        Warrant Price and the Warrant Share Number shall be subject to adjustment
        from
        time to time as set forth in this Section 4. The Issuer shall give the Holder
        notice of any event described below which requires an adjustment pursuant
        to
        this Section 4 in accordance with the notice provisions set forth in Section
        5.

      

      (a) Recapitalization,
        Reorganization, Reclassification, Consolidation, Merger or Sale.

       

      (i)
        In
        case the Issuer after the Original Issue Date shall do any of the following
        (each, a “Triggering
        Event”):
        (a)
        consolidate or merge with or into any other Person and the Issuer shall not
        be
        the continuing or surviving corporation of such consolidation or merger,
        or (b)
        permit any other Person to consolidate with or merge into the Issuer and
        the
        Issuer shall be the continuing or surviving Person but, in connection with
        such
        consolidation or merger, any Capital Stock of the Issuer shall be changed
        into
        or exchanged for Securities of any other Person or cash or any other property,
        or (c) transfer all or substantially all of its properties or assets to any
        other Person, or (d) effect a capital reorganization or reclassification
        of its
        Capital Stock, then, and in the case of each such Triggering Event, proper
        provision shall be made to the Warrant Price and the number of shares of
        Warrant
        Stock that may be purchased upon exercise of this Warrant so that, upon the
        basis and the terms and in the manner provided in this Warrant, the Holder
        of
        this Warrant shall be entitled upon the exercise hereof at any time after
        the
        consummation of such Triggering Event, to the extent this Warrant is not
        exercised prior to such Triggering Event, to receive at the Warrant Price
        as
        adjusted to take into account the consummation of such Triggering Event,
        in lieu
        of the Common Stock issuable upon such exercise of this Warrant prior to
        such
        Triggering Event, the Securities, cash and property to which such Holder
        would
        have been entitled upon the consummation of such Triggering Event if such
        Holder
        had exercised the rights represented by this Warrant immediately prior thereto
        (including the right of a stockholder to elect the type of consideration
        it will
        receive upon a Triggering Event), subject to adjustments (subsequent to such
        corporate action) as nearly equivalent as possible to the adjustments provided
        for elsewhere in this Section 4, and the Warrant Price shall be adjusted
        to
        equal the product of (A) the closing price of the common stock of the continuing
        or surviving corporation as a result of such Triggering Event as of the date
        immediately preceding the date of the consummation of such Triggering Event
        multiplied by (B) the quotient of (i) the Warrant Price divided by (ii) the
        Per
        Share Market Value of the Common Stock as of the date immediately preceding
        the
        Original Issue Date. Immediately upon the occurrence of a Triggering Event,
        the
        Issuer shall notify the Holder in writing of such Triggering Event and provide
        the calculations in determining the number of shares of Warrant Stock issuable
        upon exercise of the new warrant and the adjusted Warrant Price. Upon the
        Holder’s request, the continuing or surviving corporation as a result of such
        Triggering Event shall issue to the Holder a new warrant of like tenor
        evidencing the right to purchase the adjusted number of shares of Warrant
        Stock
        and the adjusted Warrant Price pursuant to the terms and provisions of this
        Section 4(a)(i). Notwithstanding the foregoing to the contrary, this Section
        4(a)(i) shall only apply if the surviving entity pursuant to any such Triggering
        Event is a company that has a class of equity securities registered
        pursuant to the Securities Exchange Act of 1934, as amended, and its common
        stock is listed or quoted on a national securities exchange, national automated
        quotation system or the OTC Bulletin Board. In the event that the
        surviving entity pursuant to any

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

      such
        Triggering Event is not a public company that is
        registered pursuant to the Securities Exchange Act of 1934, as amended, or
        its
        common stock is not listed or quoted on a national securities exchange, national
        automated quotation system or the OTC Bulletin Board, then the Holder shall
        have
        the right to demand that the Issuer pay to the Holder an amount in cash equal
        to
        the value of this Warrant as of the date of the Triggering Event calculated
        in
        accordance with the Black-Scholes formula.

      

      (ii) In
        the
        event that the Holder has elected not to exercise this Warrant prior to the
        consummation of a Triggering Event, so long as the surviving entity pursuant
        to
        any Triggering Event is a company that has a class of equity securities
registered
        pursuant to the Securities Exchange Act of 1934, as amended, and its common
        stock is listed or quoted on a national securities exchange, national automated
        quotation system or the OTC Bulletin Board,
        the
        surviving entity and/or each Person (other than the Issuer) which may be
        required to deliver any Securities, cash or property upon the exercise of
        this
        Warrant as provided herein shall assume, by written instrument delivered
        to, and
        reasonably satisfactory to, the Holder of this Warrant, (A) the obligations
        of
        the Issuer under this Warrant (and if the Issuer shall survive the consummation
        of such Triggering Event, such assumption shall be in addition to, and shall
        not
        release the Issuer from, any continuing obligations of the Issuer under this
        Warrant) and (B) the obligation to deliver to such Holder such Securities,
        cash
        or property as, in accordance with the foregoing provisions of this subsection
        (a), such Holder shall be entitled to receive, and the surviving entity and/or
        each such Person shall have similarly delivered to such Holder an opinion
        of
        counsel for the surviving entity and/or each such Person, which counsel shall
        be
        reasonably satisfactory to such Holder, or in the alternative, a written
        acknowledgement executed by the President or Chief Financial Officer of the
        Issuer, stating that this Warrant shall thereafter continue in full force
        and
        effect and the terms hereof (including, without limitation, all of the
        provisions of this subsection (a)) shall be applicable to the Securities,
        cash
        or property which the surviving entity and/or each such Person may be required
        to deliver upon any exercise of this Warrant or the exercise of any rights
        pursuant hereto. 

      

      (b) Stock
        Dividends, Subdivisions and Combinations.
        If at
        any time the Issuer shall:

      

      (i) make
        or
        issue or set a record date for the holders of the Common Stock for the purpose
        of entitling them to receive a dividend payable in, or other distribution
        of,
        shares of Common Stock, 

      

         (ii)
         subdivide
        its outstanding shares of Common Stock into a larger number of shares of
        Common
        Stock, or

      

         (iii)
         combine
        its outstanding shares of Common Stock into a smaller number of shares of
        Common
        Stock,

      

      then
        (1)
        the number of shares of Common Stock for which this Warrant is exercisable
        immediately after the occurrence of any such event shall be adjusted to equal
        the number of shares of Common Stock which a record holder of the same number
        of
        shares of Common Stock for which this Warrant is exercisable immediately
        prior
        to the occurrence of such event would own or be entitled to receive after
        the
        happening of such event, and (2) the Warrant Price then in effect shall be
        adjusted to equal (A) the Warrant Price then in effect multiplied by the
        number
        of shares of Common Stock for which this Warrant is exercisable immediately
        prior to the adjustment divided by (B) the number of shares of Common Stock
        for
        which this Warrant is

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

      exercisable
        immediately after such adjustment.

      

      (c) Other
        Provisions applicable to Adjustments under this Section.
        The
        following provisions shall be ap-plicable to the making of adjustments of
        the
        number of shares of Common Stock for which this Warrant is exercisable and
        the
        Warrant Price then in effect provided for in this Section 4:

      

      (i) Computation
        of Consideration.
        In
        connection with any merger or consolidation in which the Issuer is the surviving
        corporation (other than any consolidation or merger in which the previously
        outstanding shares of Common Stock of the Issuer shall be changed to or
        exchanged for the stock or other securities of another corporation), the
        amount
        of consideration therefor shall be, deemed to be the fair value, as determined
        reasonably and in good faith by the Board, of such portion of the assets
        and
        business of the nonsurviving corporation as the Board may determine to be
        attributable to such shares of Common Stock. In the event of any consolidation
        or merger of the Issuer in which the Issuer is not the surviving corporation
        or
        in which the previously outstanding shares of Common Stock of the Issuer
        shall
        be changed into or exchanged for the stock or other securities of another
        corporation, or in the event of any sale of all or substantially all of the
        assets of the Issuer for stock or other securities of any corporation, the
        Issuer shall be deemed to have issued a number of shares of its Common Stock
        for
        stock or securities or other property of the other corporation computed on
        the
        basis of the actual exchange ratio on which the transaction was predicated,
        and
        for a consideration equal to the fair market value on the date of such
        transaction of all such stock or securities or other property of the other
        corporation. In the event any consideration received by the Issuer for any
        securities consists of property other than cash, the fair market value thereof
        at the time of issuance or as otherwise applicable shall be as determined
        in
        good faith by the Board. 

      

      (ii) When
        Adjustments to Be Made.
        The
        adjustments required by this Section 4 shall be made whenever and as often
        as
        any specified event requiring an adjustment shall occur, except that any
        adjustment of the number of shares of Common Stock for which this Warrant
        is
        exercisable that would otherwise be required may be postponed (except in
        the
        case of a subdivision or combination of shares of the Common Stock, as provided
        for in Section 4(b)) up to, but not beyond the date of exercise if such
        adjustment either by itself or with other adjustments not previously made
        adds
        or subtracts less than one percent (1%) of the shares of Common Stock for
        which
        this Warrant is exercisable immediately prior to the making of such adjustment.
        Any adjustment representing a change of less than such minimum amount (except
        as
        aforesaid) which is postponed shall be carried forward and made(x) as soon
        as
        such adjustment, together with other adjustments required by this Section
        4 and
        not previously made, would result in a minimum adjustment or (y) on the date
        of
        exercise. For the purpose of any adjustment, any specified event shall be
        deemed
        to have occurred at the close of business on the date of its
        occurrence.

      

      (iii) Fractional
        Interests.
        In
        computing ad-justments under this Section 4, fractional interests in Common
        Stock shall be taken into account to the nearest one one-hundredth
        (1/100th)
        of a
        share.

      

      (iv) When
        Adjustment Not Required.
        If the
        Issuer shall take a record of the holders of its Common Stock for the purpose
        of
        entitling them to receive a dividend or distribution or subscription or purchase
        rights and shall, thereafter and before the distribution to stockholders
        thereof, legally abandon its plan to pay or deliver such dividend, distribution,
        subscription or purchase rights, then thereafter no adjustment shall be required
        by reason of the

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

      taking
        of
        such record and any such adjustment previously made in respect thereof shall
        be
        rescinded and annulled.

       

      (d) Form
        of Warrant after Adjustments.
        The
        form of this Warrant need not be changed because of any adjustments in the
        Warrant Price or the number and kind of Securities purchasable upon the exercise
        of this Warrant.

      

      (e) Escrow
        of Warrant Stock.
        If
        after any property becomes distributable pursuant to this Section 4 by reason
        of
        the taking of any record of the holders of Common Stock, but prior to the
        occurrence of the event for which such record is taken, and the Holder exercises
        this Warrant, any shares of Common Stock issuable upon exercise by reason
        of
        such adjustment shall be deemed the last shares of Common Stock for which
        this
        Warrant is exercised (notwithstanding any other provision to the contrary
        herein) and such shares or other property shall be held in escrow for the
        Holder
        by the Issuer to be issued to the Holder upon and to the extent that the
        event
        actually takes place, upon payment of the current Warrant Price. Notwithstanding
        any other provision to the contrary herein, if the event for which such record
        was taken fails to occur or is rescinded, then such escrowed shares shall
        be
        cancelled by the Issuer and escrowed property returned.

      

      5. Notice
        of Adjustments.
        Whenever the Warrant Price or Warrant Share Number shall be adjusted pursuant
        to
        Section 4 hereof (for purposes of this Section 5, each an “adjustment”),
        the
        Issuer shall cause its Chief Financial Officer to prepare and execute a
        certificate setting forth, in reasonable detail, the event requiring the
        adjustment, the amount of the adjustment, the method by which such adjustment
        was calculated (including a description of the basis on which the Board made
        any
        determination hereunder), and the Warrant Price and Warrant Share Number
        after
        giving effect to such adjustment, and shall cause copies of such certificate
        to
        be delivered to the Holder of this Warrant promptly after each adjustment.
        Any
        dispute between the Issuer and the Holder of this Warrant with respect to
        the
        matters set forth in such certificate may at the option of the Holder of
        this
        Warrant be submitted to a national or regional accounting firm reasonably
        acceptable to the Issuer and the Holder, provided
        that the
        Issuer shall have ten (10) days after receipt of notice from such Holder
        of its
        selection of such firm to object thereto, in which case such Holder shall
        select
        another such firm and the Issuer shall have no such right of objection. The
        firm
        selected by the Holder of this Warrant as provided in the preceding sentence
        shall be instructed to deliver a written opinion as to such matters to the
        Issuer and such Holder within thirty (30) days after submission to it of
        such
        dispute. Such opinion shall be final and binding on the parties hereto. The
        costs and expenses of the initial accounting firm shall be paid equally by
        the
        Issuer and the Holder and, in the case of an objection by the Issuer, the
        costs
        and expenses of the subsequent accounting firm shall be paid in full by the
        Issuer.

      

      6. Fractional
        Shares.
        No
        fractional shares of Warrant Stock will be issued in connection with any
        exercise hereof, but in lieu of such fractional shares, the Issuer shall
        round
        the number of shares to be issued upon exercise up to the nearest whole number
        of shares.

      

      7. Reserved.
        

      

      8.  Registration
        Rights.
        The
        Holder of this Warrant is entitled to the benefit of certain registration
        rights
        with respect to the shares of Warrant Stock issuable upon the exercise of
        this
        Warrant that are equivalent to the rights granted by the Issuer pursuant
        to the
        Registration Rights Agreement; provided,
        however,
        that
        the Holder shall not be entitled to any of the rights to liquidated damages
        of
        such Persons as granted pursuant to Sections 7(a) and (e) of

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

      the
        Registration Rights Agreement; provided,
        further,
        that
        such rights are further limited to be (x) superior (as to the percentage of
        Warrant Stock that may be registered in any one registration statement to
        be
        filed by the Issuer and, if relevant, that shall be removed from any such
        registration statement), to the rights granted by the Issuer and thereafter
        limited in connection with Section 2.1(c) of the Purchase Agreement to those
        of
        the Persons listed on Schedule 2.1(c) thereof or as listed on Schedule II
        of the
        Registration Rights Agreement (but excluding, for this purpose, the Holder)
        (collectively, the “Initial
        Cut-Back Persons”)
        but
        (y) inferior to the rights granted by the Issuer to the Purchasers (as
        defined in the Registration Rights Agreement). By way of clarification, in
        the
        event that the Commission (as defined in the Registration Rights Agreement)
        does
        not permit the Issuer to register all of the Registrable Securities (as defined
        in the Registration Rights Agreement) in the Registration Statement (as defined
        in the Registration Rights Agreement) because of the Commission’s application of
        Rule 415, the Initial Cut-Back Persons shall be removed from any Registration
        Statement first; then, if additional shares need to be removed from the
        Registration Statement, shares of Warrant Stock shall be removed from such
        Registration Statement to the extent necessary; and thereafter, the Purchasers’
shares shall be removed in the priority set forth in the Registration Rights
        Agreement. The registration rights with respect to the shares of Warrant
        Stock
        issuable upon the exercise of this Warrant by any subsequent Holder may only
        be
        assigned in accordance with the terms and provisions of the Registrations
        Rights
        Agreement.

      

      9. Definitions.
        For the
        purposes of this Warrant, the following terms have the following
        meanings:

      

      “Board”
shall
        mean the Board of Directors of the Issuer.

      

      “Capital
        Stock”
means
        and includes (i) any and all shares, interests, participations or other
        equivalents of or interests in (however designated) corporate stock, including,
        without limitation, shares of preferred or preference stock, (ii) all
        partnership interests (whether general or limited) in any Person which is
        a
        partnership, (iii) all membership interests or limited liability company
        interests in any limited liability company, and (iv) all equity or ownership
        interests in any Person of any other type.

      

      “Certificate
        of Incorporation”
means
        the Certificate of Incorporation of the Issuer as in effect on the Original
        Issue Date, and as hereafter from time to time amended, modified, supplemented
        or restated in accordance with the terms hereof and thereof and pursuant
        to
        applicable law.

      

      “Common
        Stock”
means
        the Common Stock, $0.01 par value per share, of the Issuer and any other
        Capital
        Stock into which such stock may hereafter be changed.

      

      “Governmental
        Authority”
means
        any governmental, regulatory or self-regulatory entity, department, body,
        official, authority, commission, board, agency or instrumentality, whether
        federal, state or local, and whether domestic or foreign.

      

      “Holders”
mean
        the Persons who shall from time to time own any Warrant. The term “Holder” means
        one of the Holders.

      

      “Independent
        Appraiser”
means
        a
        nationally recognized or major regional investment banking firm or firm of
        independent certified public accountants of recognized standing (which may
        be
        the firm that regularly examines the financial statements of the Issuer)
        that is
        regularly engaged in the business of appraising the

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

      Capital
        Stock or assets of corporations or other entities as going concerns, and
        which
        is not affiliated with either the Issuer or the Holder of any
        Warrant.

      

      “Issuer”
means
        BPO Management Services, Inc., a Delaware corporation, and its successors.
        

      

      “Original
        Issue Date”
means
        June 13, 2007.

      

      “OTC
        Bulletin Board”
means
        the over-the-counter electronic bulletin board.

      

      “Person”
means
        an individual, corporation, limited liability company, partnership, joint
        stock
        company, trust, unincorporated organization, joint venture, Governmental
        Authority or other entity of whatever nature.

      

      “Per
        Share Market Value”
means
        on any particular date (a) the last closing bid price per share of the Common
        Stock on such date on the OTC
        Bulletin Board or
        a
        registered national stock exchange on which the Common Stock is then listed,
        or
        if there is no such price on such date, then the closing bid price on such
        exchange or quotation system on the date nearest preceding such date, or
        (b) if
        the Common Stock is not quoted or listed then on the OTC Bulletin Board or
        any
        registered national stock exchange, the last closing bid price for a share
        of
        Common Stock in the over-the-counter market, as reported by the OTC Bulletin
        Board or in Pink Sheets, LLC or similar organization or agency succeeding
        to its
        functions of reporting prices) at the close of business on such date, or
        (c) if
        the Common Stock is not then reported by the OTC Bulletin Board or Pink Sheets,
        LLC (or similar organization or agency succeeding to its functions of reporting
        prices), then the average of the “Pink Sheet” quotes for the applicable Trading
        Days preceding such date of determination, or (d) if the Common Stock is
        not
        then publicly traded the fair market value of a share of Common Stock as
        determined by the Board; provided,
        however,
        that
        all determinations of the Per Share Market Value shall be appropriately adjusted
        for any stock dividends, stock splits or other similar transactions during
        such
        period. In determining the fair market value of any shares of Common Stock,
        no
        consideration shall be given to any restrictions on transfer of the Common
        Stock
        imposed by agreement or by federal or state securities laws, or to the existence
        or absence of, or any limitations on, voting rights.

      

      “Purchase
        Agreement”
means
        the Series D Convertible Preferred Stock Purchase Agreement dated as of June
        13,
        2007, among the Issuer and the purchasers named on Exhibit A
        thereto.

      

      “Securities”
means
        any debt or equity securities of the Issuer, whether now or hereafter
        authorized, any instrument convertible into or exchangeable for Securities
        or a
        Security, and any option, warrant or other right to purchase or acquire any
        Security. “Security” means one of the Securities.

      

      “Securities
        Act”
means
        the Securities Act of 1933, as amended, or any similar federal statute then
        in
        effect.

      

      “Subsidiary”
means
        any corporation at least 50% of whose outstanding Voting Stock shall at the
        time
        be owned directly or indirectly by the Issuer or by one or more of its
        Subsidiaries, or by the Issuer and one or more of its
        Subsidiaries.

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

      “Term”
has
        the
        meaning specified in Section 1 hereof.

      

      “Trading
        Day”
means
        (a) a day on which the Common Stock is quoted on the OTC Bulletin Board,
        or (b)
        if the Common Stock is not quoted on the OTC Bulletin Board, a day on which
        the
        Common Stock is quoted in the over-the-counter market as reported by Pink
        Sheets, LLC (or any similar organization or agency succeeding its functions
        of
        reporting prices); provided,
        however,
        that in
        the event that the Common Stock is not listed or quoted as set forth in (a)
        or
        (b) hereof, then Trading Day shall mean any day except Saturday, Sunday and
        any
        day which shall be a legal holiday or a day on which banking institutions
        in the
        State of New York are authorized or required by law or other government action
        to close.

      

      “Voting
        Stock”
means,
        as applied to the Capital Stock of any corporation, Capital Stock of any
        class
        or classes (however designated) having ordinary voting power for the election
        of
        a majority of the members of the Board (or other governing body) of such
        corporation, other than Capital Stock having such power only by reason of
        the
        happening of a contingency.

      

      “Warrants”
means
        this Warrant, and any other warrants of like tenor issued in substitution
        or
        exchange hereof pursuant to the provisions of Section 2(c) or 2(d).

      

      “Warrant
        Price”
        initially means $0.60, as such price may be adjusted from time to time in
        accordance with the adjustments specified in this Warrant, including Section
        4
        hereto.

      

      “Warrant
        Share Number”
means
        at any time the aggregate number of shares of Warrant Stock which may at
        such
        time be purchased upon exercise of this Warrant, after giving effect to all
        prior adjustments and increases to such number made or required to be made
        under
        the terms hereof.

      

      “Warrant
        Stock”
means
        Common Stock issuable upon exercise of this Warrant or otherwise issuable
        pursuant to this Warrant.

      

      10. Other
        Notices.
        In case
        at any time:

      

      
        	 	
                (A)

              	
                the
                  Issuer shall make any distributions to the holders of Common Stock;
                  or

              

      

      

      
        	 	
                (B)

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

              

      

      

      
        	 	
                (C)

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

              

      

      

      
        	 	
                (D)

              	
                there
                  shall be any capital reorganization by the Issuer;
                  or

              

      

      

      
        	 	
                (E)

              	
                there
                  shall be any (i) consolidation or merger involving the Issuer or
                  (ii)
                  sale, transfer or other disposition of all or substantially all
                  of the
                  Issuer’s property, assets or business (except a merger or other
                  reorganization in which the
                  Issuer

              

      

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      shall
        be
        the surviving corporation and its shares of Capital Stock shall continue
        to be
        outstanding and unchanged and except a consolidation, merger, sale, transfer
        or
        other disposition involving a wholly-owned Subsidiary); or

      

      
        	 	
                (F)

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

              

      

      

      then,
        in
        each of such cases, the Issuer shall give written notice to the Holder of
        the
        date on which (i) the books of the Issuer shall close or a record shall be
        taken
        for such dividend, distribution or subscription rights or (ii) such
        reorganization, reclassification, consolidation, merger, disposition,
        dissolution, liquidation or winding-up, as the case may be, shall take place.
        Such notice also shall specify the date as of which the holders of Common
        Stock
        of record shall participate in such dividend, distribution or subscription
        rights, or shall be entitled to exchange their certificates for Common Stock
        for
        securities or other property deliverable upon such reorganization,
        reclassification, consolidation, merger, disposition, dissolution, liquidation
        or winding-up, as the case may be. Such notice shall be given at least twenty
        (20) days prior to the action in question and not less than ten (10) days
        prior
        to the record date or the date on which the Issuer’s transfer books are closed
        in respect thereto. This Warrant entitles the Holder to receive copies of
        all
        financial and other information distributed or required to be distributed
        to the
        holders of the Common Stock.

      

      11. Amendment
        and Waiver.
        Any
        term, covenant, agreement or condition in this Warrant may be amended, or
        compliance therewith may be waived (either generally or in a particular instance
        and either retroactively or prospectively), by a written instrument or written
        instruments executed by the Issuer and the Holder; provided,
        however,
        that no
        such amendment or waiver shall reduce the Warrant Share Number, increase
        the
        Warrant Price, shorten the period during which this Warrant may be exercised
        or
        modify any provision of this Section 11 without the consent of the Holder
        of
        this Warrant. 

      

      12. Governing
        Law; Jurisdiction.
        This
        Warrant shall be governed by and construed in accordance with the internal
        laws
        of the State of New York, without giving effect to any of the conflicts of
        law
        principles which would result in the application of the substantive law of
        another jurisdiction. This Warrant shall not be interpreted or construed
        with
        any presumption against the party causing this Warrant to be drafted. The
        Issuer
        and the Holder agree that venue for any dispute arising under this Warrant
        will
        lie exclusively in the state or federal courts located in New York County,
        New
        York, and the parties irrevocably waive any right to raise forum
        non conveniens
        or any
        other argument that New York is not the proper venue. The Issuer and the
        Holder
        irrevocably consent to personal jurisdiction in the state and federal courts
        of
        the state of New York. The Issuer and the Holder consent to process being
        served
        in any such suit, action or proceeding by mailing a copy thereof to such
        party
        at the address in effect for notices to it under this Warrant and agrees
        that
        such service shall constitute good and sufficient service of process and
        notice
        thereof. Nothing in this Section 12 shall affect or limit any right to serve
        process in any other manner permitted by law. The Issuer and the Holder hereby
        agree that the prevailing party in any suit, action or proceeding arising
        out of
        or relating to this Warrant, shall be entitled to reimbursement for reasonable
        legal fees from the non-prevailing party. The parties hereby waive all rights
        to
        a trial by jury.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

      13. Notices.
        Any
        notice, demand, request, waiver or other communication required or permitted
        to
        be given hereunder shall be in writing and shall be effective (a) upon hand
        delivery or delivery by telecopy, e-mail or facsimile at the address or number
        designated below (if delivered on a business day during normal business hours
        where such notice is to be received), or the first business day following
        such
        delivery (if delivered other than on a business day during normal business
        hours
        where such notice is to be received) or (b) on the second business day following
        the date of mailing by express courier service, fully prepaid, addressed
        to such
        address, or upon actual receipt of such mailing, whichever shall first occur.
        The addresses for such communications shall be:

       

      If
        to the
        Issuer:

      BPO
        Management Services, Inc. 

      1290
        N.
        Hancock, Ste 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 (which copies

      shall
        not
        constitute notice)

      to:

      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 92612-2427

      Attention:
        Jack Cornman, Esq.

      Tel.
        No.:
        (949) 224-1500

      Fax
        No.:
        (949) 224-1505

      E-mail:
        jack@cornmanlaw.com

      

      

      If
        to any
        Holder:

      C.
        E.
        Unterberg, Towbin, Inc.

      350
        Madison Avenue

      New
        York,
        NY 10017

      Attention:
        Michael E. Marrus

      Tel.
        No.:
        (212) 389-8024

      Fax
        No.:
        (212) 389-8880

      E-mail:
        mmarrus@unterberg.com

      

      Any
        party
        hereto may from time to time change its address for notices by giving written
        notice of such changed address to the other party hereto.

       

      14. Warrant
        Agent.
        The
        Issuer may, by written notice to each Holder of this Warrant, appoint an
        agent
        having an office in New York, New York for the purpose of issuing shares
        of
        Warrant Stock on the exercise of this Warrant pursuant to subsection (b)
        of
        Section 2 hereof,

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

      exchanging
        this Warrant pursuant to subsection (d) of Section 2 hereof or replacing
        this
        Warrant pursuant to subsection (d) of Section 3 hereof, or any of the foregoing,
        and thereafter any such issuance, exchange or replacement, as the case may
        be,
        shall be made at such office by such agent.

      

      15. Remedies.
        The
        Issuer stipulates that the remedies at law of the Holder of this Warrant
        in the
        event of any default or threatened default by the Issuer in the performance
        of
        or compliance with any of the terms of this Warrant are not and will not
        be
        adequate and that, to the fullest extent permitted by law, such terms may
        be
        specifically enforced by a decree for the specific performance of any agreement
        contained herein or by an injunction against a violation of any of the terms
        hereof or otherwise.

      

      16. Successors
        and Assigns.
        This
        Warrant and the rights evidenced hereby shall inure to the benefit of and
        be
        binding upon the successors and permitted assigns of the Issuer, the Holder
        hereof and (to the extent provided herein) the Holders of Warrant Stock issued
        pursuant hereto, and shall be enforceable by any such Holder or Holder of
        Warrant Stock.

      

      17. Modification
        and Severability.
        If, in
        any action before any court or agency legally empowered to enforce any provision
        contained herein, any provision hereof is found to be unenforceable, then
        such
        provision shall be deemed modified to the extent necessary to make it
        enforceable by such court or agency. If any such provision is not enforceable
        as
        set forth in the preceding sentence, the unenforceability of such provision
        shall not affect the other provisions of this Warrant, but this Warrant shall
        be
        construed as if such unenforceable provision had never been contained
        herein.

      

      18. Headings.
        The
        headings of the Sections of this Warrant are for convenience of reference
        only
        and shall not, for any purpose, be deemed a part of this Warrant.

      

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

      

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

      

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

      

      

      BPO
        MANAGEMENT SERVICES, INC.

       

       

      By: 
        /s/ James Cortens

        
          

        

      

      Name: 
        James Cortens

      Title:    President
        

      
 

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

      

      EXERCISE
        FORM

      WARRANT

      

      BPO
        MANAGEMENT SERVICES, INC.

      

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

      

      Dated:
        _________________

      Signature ___________________________

      Address 
        ____________________________

      ___________________________________

      

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

      

      The
        undersigned is an “accredited investor” as defined in Regulation D under the
        Securities Act of 1933, as amended.

       

      The
        undersigned intends that payment of the Warrant Price shall be made as (check
        one): 

       

      Cash
        Exercise_______ 

       

      Cashless
        Exercise_______

       

      If
        the
        Holder has elected a Cash Exercise, the Holder shall pay the sum of $________
        by
        certified or official bank check (or via wire transfer) to the Issuer in
        accordance with the terms of the Warrant. 

       

      If
        the
        Holder has elected a Cashless Exercise, a certificate shall be issued to
        the
        Holder for the number of shares equal to the whole number portion of the
        product
        of the calculation set forth below, which is ___________. The Issuer shall
        pay a
        cash adjustment in respect of the fractional portion of the product of the
        calculation set forth below in an amount equal to the product of the fractional
        portion of such product and the Per Share Market Value on the date of exercise,
        which product is ____________.

       

      X
        = Y -
(A)(Y)

       B

      

      Where: 

      

      The
        number of shares of Common Stock to be issued to the Holder
        __________________(“X”).

      

      The
        number of shares of Common Stock purchasable upon exercise of all of the
        Warrant
        or, if only a portion of the Warrant is being exercised, the portion of the
        Warrant being exercised ___________________________ (“Y”). 

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

      

      The
        Warrant Price ______________ (“A”). 

      

      The
        Per
        Share Market Value of one share of Common Stock _______________________
        (“B”).

      

      

      ASSIGNMENT

      

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

      

      Dated:
        _________________

      Signature
        ___________________________

      Address  
        ___________________________

      ___________________________________

      

      PARTIAL
        ASSIGNMENT

      

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

      

      Dated:
        _________________

      Signature
        ___________________________

      Address
        ____________________________

      ___________________________________

      

      FOR
        USE
        BY THE ISSUER ONLY:

      

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

       

      
        
           

        

        
          -18-Unassociated Document

    

      Exhibit
        10.1

      

      WARRANT
        PURCHASE AGREEMENT

      

      

      

        This
          Warrant Purchase Agreement (this "Agreement")
          is
          made and entered into as of the 25 day of May, 2007, by and between CYBERLUX
          CORPORATION, a Nevada corporation, (“Seller”)
          DEUTSCHE BANK AG (the “Purchaser”), All of the foregoing collectively referred
          to as the “Parties.”
          

         

        WHEREAS,
          The
          Seller owns warrants entitling the Purchaser to purchase 100,000,000 of
          shares
          of Common Stock from the Seller the Purchaser, set forth opposite such
          Seller's
          name in Exhibit
          A
          (collectively the “Warrant
          Stock”);

        

        WHEREAS,
          Seller
          desires to sell the Warrants to the Purchaser, pursuant to the terms and
          conditions contained herein;

         

        WHEREAS,
          the
          purchase price for the Warrants will be $150,000 (the "Warrant
          Purchase Price”);

        

        NOW
          THEREFORE,
          in
          consideration of the mutual covenants, agreements, conditions, representations,
          and warranties contained in this Agreement, the Purchaser and Seller hereby
          agree as follows:

      
        	 	
                1.
                  

              	
                PURCHASE
                  AND SALE OF WARRANTS.

              

      

      

      (a)
        Subject to the terms and conditions of this Agreement, at the Closing (as
        defined below, the Seller hereby agrees to sell to Purchaser and the Purchaser
        hereby agrees to purchase from Seller, all right, title and interest in and
        to
        the Warrants in consideration for the Warrant Purchase Price.

      

      (b)
        Subject to all the terms and conditions of this Agreement, in payment for
        the
        Warrants, Purchaser shall deliver to Seller at the Closing, by means of a
        bank
        wire transfer, the amount indicated on Exhibit A set opposite the name of
        

      Seller.
        This consideration shall be payment in full for all of the
        Warrants.

      

      (c)
        The
        purchase and sale of the Warrants shall be held at the offices of the John
        W.
        Ringo, Attorney at Law, 241 Lamplighter Lane, Marietta, Georgia 30067 within
        two
        business days of the execution hereof (the “Closing Date”) , or at such other
        place, time and date as Seller and Purchaser shall mutually agree. At the
        Closing, the Seller shall deliver to Purchaser, the certificates representing
        the Warrants, and Purchaser shall deliver to the Seller the Warrant Purchase
        Price to the escrow account of John W. Ringo, Attorney at Law in order to
        complete the transaction. (Wiring instructions are indicated on Exhibit A.
        

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

        2.
           REPRESENTATIONS
          AND WARRANTIES OF THE SELLER

        

        The
          Seller hereby represents and warrants to the Purchaser that the statements
          contained in this Section 2 are correct and complete as of the date of
          this
          Agreement and shall correct and complete as of the Closing Date with respect
          to
          of the Seller as follows:

      

      
         

        
          2.1 AUTHORIZATION
            OF TRANSACTIONS.
            Seller
            has full power and authority to execute and deliver this Agreement and
            to
            perform execute and deliver this Agreement and to perform its obligations
            hereunder. This Agreement constitutes the valid and legally binding obligation
            of Seller, enforceable in accordance with its terms and conditions. Seller
            need
            not give any notice to, make any filing with, or obtain, any authorization,
            consent or approval of any government or governmental agency in order
            to
            consummate the transactions contemplated by this Agreement.

          

          2.2 WARRANTS.
            The
            Seller hold of record and own beneficially the Warrants for the number
            of shares
            of common stock purchasable under the Warrants, set forth opposite such
            Seller’s
            name in Exhibit A, free and clear of any restrictions on transfer (other
            than
            restrictions under the Securities Act and State securities laws), taxes,
            security interests, purchase rights, contracts, commitments, claims,
            liens,
            charges, pledges, encumbrances and demands of any kind or nature
            whatsoever

          .

          3. REPRESENTATIONS
            AND WARRANTIES OF PURCHASER

          

          The
            Purchaser represents and warrants to the Seller that the, statements
            contained
            in the Section 3 are correct and complete as of the date hereof and will
            correct
            and complete as of the Closing Date as follows:

          

          AUTHORITY.
            The
            Purchaser is a corporation duly organized, validly existing and in good
            standing
            under the laws of the State of Nevada. The purchaser has all requisite
            corporate
            power and authority to enter into this Agreement and to consummate the
            transactions contemplated hereby and thereby. All corporate acts and
            other
            proceedings required to be taken by the Purchaser to authorize the execution,
            delivery and performance of the Agreement and the consummation of the
            transactions contemplated hereby and thereby have been duly and properly
            taken.
            This Agreement has been duly executed and delivered by the Purchaser
            and
            constitutes a valid and binding obligation of the Purchaser, enforceable
            against
            the Purchaser in accordance with its terms. 

          

          4. CONDITIONS
            OF CLOSING.

          

          4.1
            The
            following shall be conditions precedent to the Purchaser’s obligations
            hereunder, and shall be accomplished at or before the Closing:

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          

          (a)
            the
            representations and warranties set forth in Section 2 above shall be
            true and
            correct in all material respects at and as of the Closing Date;

           

          (b)
            execution and delivery of this Agreement by the Seller; and

          

          (c)
            assignment and delivery of the Warrant Stock to the Purchaser.

          

          4.2
            The
            following shall be conditions precedent to the Seller’ obligations hereunder,
            and shall be accomplished on or before the Closing:

          

          (a)
            the
            representations and warranties set forth in Section 3 above shall be
            true and
            correct in all material respects at and as of the Closing Date; and

          

          (b)
            execution and delivery of this Agreement by the Purchaser; and

           

          (c)
            payment of the Warrant Purchase Price to the Seller by the
            Purchaser.

          

          5. MISCELLANEOUS
            PROVISIONS.

          

          5.1 MODIFICATIONS
            AND WAIVERS.
            This
            Agreement may not be amended or modified, nor may the rights of any party
            hereunder be waived, except by a written document that is executed by
            the
            Parties.

           

          5.2 NOTICES.
            Any
            notice, request, consent, or other communication hereunder shall be in
            writing,
            and shall be sent by one of the following means: (i) by registered or
            certified
            first class mail, postage prepaid; (ii) by facsimile transmission; (iii)
            by
            reputable overnight courier service; or (iv) by personal delivery, and
            shall be
            properly addressed as follows:

           

          
            	
                    If
                      to the Seller, to: 

                  	
                    Cyberlux
                      Corporation

                  
	 	
                    4625
                      Creekstone Drive

                  
	 	
                    Suite
                      130

                  
	 	
                    Durham,
                      NC 27703

                  
	 	
                    Attention:
                      Donald F. Evans

                  
	 	
                    Chief
                      Executive Officer

                  
	 	
                    Facsimile:
                      (919) 474-9712

                  
	 	 
	If
                    to the Purchaser,
                    to:	To
                    Purchaser as set
                    forth on Exhibit A

          

           

          or
            to
            such other address or addresses as the Seller or Purchaser shall hereafter
            designate to the other party in writing

          

          5.
            3 ENTIRE
            AGREEMENT.
            This
            Agreement, including the Exhibits hereto, constitutes the entire agreement
            between the Parties hereto in relation to the matters contemplated hereby.
            Any
            prior written or oral negotiations, correspondence, or understandings
            relating
            to the matters contemplated hereby shall be superseded by this Agreement
            and
            shall have no force or effect.

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          

          

          5,
            4 FURTHER
            ASSURANCES.
            Each
            Party hereby agrees to take all actions, and execute all documents and
            instruments as either Party deems reasonably necessary or appropriate
            to give
            effect to this Agreement.

          

          5.5 SEVERABILITY.
            If any
            provision which is not essential to the effectuation of the basic purpose
            of the
            Agreement is determined by a court of competent jurisdiction to be invalid
            and
            contrary to any existing or future law, such invalidity shall not impair
            the
            operation of the remaining provisions of this Agreement’

          

          5.6 HEADINGS.
            The
            headings of the Sections of this Agreement are inserted for convenience
            of
            reference only and shall not affect the construction or interpretation
            of any
            provisions hereof.

           

          5.7 COUNTERPARTS.
            This
            Agreement may be executed in any number of counterparts, each of which
            when
            executed and delivered shall be an original, but all of which together
            shall
            constitute one and the same instrument.

          

          5.8 GOVERNING
            LAW.
            This
            Agreement shall be construed in accordance with and governed by the laws
            of the
            State of Nevada without regard to the law of conflict of laws.

          

          (Signature
            page follows)

           

           

           

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          
 

          IN
            WITNESS WHEREOF,
            the
            undersigned Purchaser and the Seller have caused this Agreement to be
            duly
            executed as of the date first above written.

          

          CYBERLUX
            CORPORATION

          

          /s/
            DONALD F. EVANS

          Donald
            F.
            Evans

          Chief
            Executive Officer

          

           

          

          

          DEUTSCHE
            BANK AG

          

          /s/
            GEORGE PAN

          George
            Pan

          Managing
            Director 

          

          
 

          
            
               

            

            
               

              
                

              

            

            
               

            

          

          

          

          

          

          

          

          

          

          

          EXHIBIT
            A

          

          

          CYBERLUX
            CORPORATION

          

          RESIDENCE:
            Nevada

          

          
            	
                    ADDRESS:

                  	
                    Cyberlux
                      Corporation

                  
	 	
                    4625
                      Creekstone Drive

                  
	 	
                    Suite
                      130

                  
	 	
                    Durham,
                      NC 27703

                  
	 	
                    Facsimile:
                      (919) 474-9712

                  

          

          
 

          
            
              	
                      Number
                        of Warrants:

                    	
                      100,000,000

                    
	
                      Aggregate
                        Sale Price

                    	
                      $150,000

                    

            

          

          

           

           

           

          DEUTSCHE
            BANK AG

          60
            Wall
            Street

          New
            York,
            NY 10005

          Facsimile:
            (212) 797-0275

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