Document:

SCHEDULE
        OF EXCEPTIONS

       

      This
        constitutes the Schedule of Exceptions (the “Disclosure
        Schedule”)
        delivered by BPO
        Management Services, Inc., a Delaware corporation (the "Company"
        or
“BPOMS”) pursuant to that certain SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE
        AGREEMENT (the "Agreement")
        dated
        as of June 13, 2007 by and among 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
        attached
        to such Agreement (individually, a "Purchaser"
        and
        collectively, the "Purchasers").
        Unless
        the context otherwise requires, all capitalized terms used in this Disclosure
        Schedule shall have the respective meanings assigned to them in the Agreement.
        

       

      Reference
        to “Sub”
means
        BPOMS/HRO, Inc., a Delaware corporation (formerly BPO Management Services,
        Inc.), a wholly owned subsidiary of the Company.

       

      No
        disclosure in this Disclosure Schedule relating to any possible breach or
        violation of any agreement, law or regulation shall be construed as an admission
        or indication that any such breach or violation exists or has actually occurred.
        

       

      No
        reference to or disclosure of any item or other matter in this Disclosure
        Schedule shall be construed as an admission or indication that such item
        or
        other matter is material or that such item or other matter is required to
        be
        referred to or disclosed in this Disclosure Schedule. 

       

      This
        Disclosure Schedule and the information and disclosures contained in this
        Disclosure Schedule are intended only to qualify and limit the representations
        and warranties of the Company contained in the Agreement and shall not be
        deemed
        to expand in any way the scope or effect of any such representations or
        warranties.

       

      Headings
        have been inserted on the sections in these Disclosure Schedules for convenience
        of referral only and shall to no extent have the effect of amending or changing
        the express description of the sections as set forth in the Agreement.
References
        to any document do not purport to be complete and are qualified in their
        entirety by the contents of such document itself. Information
        disclosed in one section hereof shall be deemed disclosed in response to
        such
        other sections as it may apply if application to such section is reasonably
        apparent.

      
        
           

        

        
          -1-

          
            

          

        

        
           

        

      

      Schedule
        2.1(a)

      ORGANIZATION,
        GOOD STANDING AND POWER

      

      The
        Company and Sub are both qualified to do business in California.

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(b)

      AUTHORIZATION

      

      No
        disclosure required.

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(c)

      CAPITALIZATION

      

      
        	
                1.
                  

              	
                The
                  authorized capital stock of the Company and the shares thereof
                  currently
                  issued and outstanding as of the date hereof are set forth below:
                  

              

      

       

      Convertible
        preferred stock A, par value $.01; authorized 1,608,612 shares; 1,605,598
        shares
        issued and outstanding

      Convertible
        preferred stock B, par value $.01; authorized 1,449,204 shares; 1,449,204
        shares
        issued and outstanding

      Non-convertible
        preferred stock C, par value $.01; authorized 21,738,000 shares; 916,667
        shares
        issued and outstanding

      Authorized
        and unissued preferred stock: 5,000,000 shares.

      Common
        stock, par value $.01; authorized 150,000,000 shares; 8,619,400 shares issued
        and outstanding

      

      

      

      
        	
                2.
                  

              	
                The
                  following agreements reflect registration rights regarding common
                  stock
                  and preferred stock of the Company which was previously exchanged
                  for
                  common stock and preferred stock of Sub in connection with the
                  merger
                  transaction with netGuru, Inc., a Delaware corporation that closed
                  on
                  December 15, 2006:

              

      

       

      
        	 	
                a.

              	
                Registration
                  Rights Agreement dated July 29, 2005 entered into among MR. BRIAN
                  MEYER,
                  MR. DONALD WEST, MR. RAY BELISLE, MRS. LYNN MEYER, MRS. SHARON
                  WEST, WEST
                  LTP TRUST, James Cortens, and Patrick Dolan and Sub with respect
                  to shares
                  of common stock of Sub including common stock underlying Series
                  A
                  Preferred Stock and Series B Preferred Stock of Sub as of or about
                  August
                  1, 2005. 

              

      

      
        	 	
                b.

              	
                Registration
                  Rights Agreement dated November 1, 2005 entered into between Thomas
                  E.
                  Lucas (the “Lucas”) and Sub with respect to 175,000 shares of common stock
                  of Sub issued to Lucas on or about November 1,
                  2005.

              

      

      
        	 	
                c.

              	
                Confirmation
                  and Modification to Registration Rights Agreement dated May 31_,
                  2007
                  entered into among Mr. Patrick Dolan,  Mr.
                  James Cortens, Mr.
                  Brian Meyer, Mr.
                  Donald West, Mr.
                  Ray Belisle, Mrs.
                  Lynn Meyer, Mrs.
                  Sharon West, West
                  LTP Trust, and Mr. Thomas E. Lucas
                  for the benefit of the Company, as successor to
                  Sub.

              

      

      

       

      3.
        Outstanding options and warrants

       

      Options
        outstanding: 2,487,003

      Warrants
        outstanding: 936,563

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

      4. The
        Company is not a party to any agreement restricting the voting or transfer
        of
        any shares of the capital stock of the Company except as follows: certain
        holders of stock (“Restricted Parties”) of the Company are subject to certain
        restrictions on transfer of stock of the Company as provided for in various
        stock purchase and asset purchase agreements with respect to the Sub’s prior
        acquisition of assets or stock of the following entities: Novus Imaging
        Solutions, Inc.; Digica, Inc., and BPO MANAGEMENT SERVICES, LLC a California
        limited liability company. The Restricted Parties are: Thomas E. Lucas, Kevin
        J.
        Smith, Julie Smith, Robert G. Bisci, Michele Bisci, and James Buchanan, The
        Buchanan Family Trust, and Arlene Buchanan.

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(d)

      VALID
        ISSUANCE OF SHARES

       

      No
        disclosure required.

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(e)

      CONFLICTS

       

      Pursuant
        to the netGuru Distributor Agreement between Web4, a division of netGuru,
        Inc.
        (now the Company), and TPT Technologies, Inc. d/b/a CMstat (“CMstat”),
        the
        Company must notify CMstat within 24 hours of any change in ownership and
        the
        nature of the change, including the name of the new owner. If there is any
        such
        change in ownership, CMstat may terminate said agreement by giving the Company
        written notice. 

      

      TPT
        Technologies is an enterprise content management software company who is
        also a
        distributor of BPOMS’ eReview software product in North America. If requested by
        their client they will package BPOMS’ software with their product and sell to
        customer. They provide about $40,000 worth of software sales per year for
        the
        BPOMS Web4 division. As part of their distributorship arrangement with BPOMS
        they have the right to terminate this relationship if BPOMS was acquired
        by a
        competitor of theirs (e.g., IBM, or EMC).

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(f)

      FINANCIAL
        STATEMENTS

       

      No
        disclosure required.

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(g)

      SUBSIDIARIES

       

      Each
        subsidiary of the Company is wholly-owned by the Company and is listed, together
        with the jurisdiction of its incorporation or organization, below:

       

      

        
          	
                  Name

                	 	
                  Jurisdiction 

                
	 	 	 
	
                  ADAPSYS
                    Document Management LP

                	 	
                  Ontario

                
	
                  ADAPSYS
                    LP

                	 	
                  Ontario

                
	
                  Novus
                    Imaging Solutions, Inc.

                	 	
                  Canada

                
	
                  Digica,
                    Inc.

                	 	
                  New
                    York

                
	
                  NetGuru
                    Systems, Inc.

                	 	
                  New
                    Hampshire

                
	
                  Research
                    Engineers, GmbH

                	 	
                  Germany

                
	
                  Research
                    Engineers, Europe Ltd. (inactive)

                	 	
                  United
                    Kingdom

                
	
                  Research
                    Engineers International Pte. Ltd. (inactive)

                	 	
                  Singapore

                
	
                  R-Cube
                    Technologies, Inc. (inactive)

                	 	
                  California

                
	
                  PacSoft
                    Incorporated (inactive)

                	 	
                  Washington

                
	
                  NetGuru
                    Consulting, Inc. (inactive)

                	 	
                  New
                    Hampshire

                
	
                  Allegria
                    Software, Inc. (inactive)

                	 	
                  California

                
	
                  BPOMS/HRO,
                    Inc.

                	 	
                  Delaware

                
	
                  Adapsys
                    Transaction Processing Inc.

                	 	
                  Canada

                
	
                  Adapsys
                    Document Management Inc.

                	 	
                  Canada

                

        

      

      See
        Schedule 2.1(c) above.

       

      
        
           

        

        
          -9-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(h)

      MATERIAL
        ADVERSE CHANGE

       

      

      No
        disclosure required.

       

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(i)

      UNDISCLOSED
        LIABILITIES

       

      

       

      No
        disclosure required.

       

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(j)

      UNDISCLOSED
        EVENTS OR CIRCUMSTANCES

       

      

      No
        disclosure required.

       

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(k)

      INDEBTEDNESS

       

      

        
          	
                  a.
                    Credit facility from Bank of Nova Scotia, secured by assets of
                    the
                    Company, variable annual interest rate of 7% 

                	 	
                  $

                	
                  196,280

                	 
	
                  b.
                    Operating line of credit from Bank of Nova Scotia, secured by
                    assets of
                    the Company, variable annual interest rate of 7.25% 

                	 	 	
                  94,042

                	 
	
                  c.
                    Loan from Business Development Bank of Canada, expiring May 21,
                    2010,
                    variable annual interest rate of 11.25% 

                	 	 	
                  54,924

                	 
	
                  d.
                    Collateralized loan payable to Chrysler Financial, expiring March
                    2008,
                    fixed interest rate of 13.9% 

                	 	 	
                  7,424

                	 
	 	 	 	 	 
	
                  Capital
                    lease obligations

                	 	
                  $

                	
                  658,429

                	 
	
                  Purchase
                    price payable

                	 	
                  $

                	
                  1,157,052

                	 
	
                  Founders
                    Bridge Loans

                	 	
                  $

                	
                  1,200,000

                	 
	
                  Das
                    Family Holdings

                	 	
                  $

                	
                  125,000

                	 
	
                  Total

                	 	
                  $

                	
                  3,493,151

                	 

        

         

      

    

    
      Bridge
        loans in the total aggregate principal sum of $1,200,000 made to the Company
        by
        James Cortens, Patrick Dolan and ITO Solutions LLC (wholly owned directly
        or
        indirectly by Patrick Dolan). The terms of such loans include: interest rate
        of
        9%; interest only payable monthly with a two year maturity date.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

         

        Schedule
          2.1(l)

      

      TITLE
        TO ASSETS

       

      No
        disclosure required.

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(m)

      ACTIONS
        PENDING

      

      Morrison
        et al. v. Skytrack Systems, Inc. et al.
        (File
        No. CI 06-01-47005) was filed against BPOMS, ADAPSYS, and Adapsys Transaction
        Processing, Inc. (formerly Skytrack Systems, Inc.) and certain affiliates
        of
        BPOMS on May 12, 2006 in the Court of Queen’s Bench of Manitoba in the City of
        Winnipeg by a total of 28 former employees of ADAPSYS L.P., a partnership
        of
        which ADAPSYS Transaction Processing, Inc. serves as general partner. As
        of the
        date of this document the Company has reached settlements with 5 of the original
        28 plaintiffs leaving 23 plaintiffs (the “Remaining Plaintiffs”). The Remaining
        Plaintiffs allege that their employment was terminated in February of 2006
        without either reasonable notice or compensation in lieu of reasonable notice,
        and that the defendants acted unfairly and improperly in effecting the
        termination. The Remaining Plaintiffs seek unspecified damages for severance
        payments and lost employment benefits allegedly arising out of the termination.
        

       

      The
        Company has filed a statement of defense. On March 8, 2007, the Remaining
        Plaintiffs filed a Motion for summary judgment and a Motion to strike the
        statement of defense. The Company is contesting those Motions. In addition,
        in
        June 2006, the Company filed a Motion to have BPOMS removed as a defendant
        in
        this action on the basis that it was not the employer of the plaintiffs.
        That
        Motion was adjourned to enable the parties to negotiate a possible settlement.
        At the time of this disclosure, no dates have been set for hearings on these
        Motions. 

      

      The
        Company recorded the estimated liability as part of the allocation of the
        purchase price of the ADAPSYS entities in August 2005, and reduces the liability
        as individual prior employees and the Company reach agreement on the amount
        of
        termination payment due. To date the Company has paid out approximately $270,000
        to its prior employees who were terminated in February 2006, including former
        employees who were not part of the claim and accepted Company’s original
        severance offer.

      

      

      

      Worldcom
        International Data Services, Inc. vs NetGuru, Inc.
        was
        filed Feb 27, 2007 in Orange County claiming $34,502.10 relating to a data
        line
        that NetGuru claims did not work and which the Company (BPOMS) is attempting
        to
        settle for approximately $15,000. This $15,000 amount has been accrued on
        the
        BPOMS consolidated balance sheet.

       

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(n)

      COMPLIANCE
        WITH LAW

       

      

      No
        disclosure required.

       

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(o)

      TAXES

       

      

      No
        disclosure required.

       

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(p)

      FEES

       

      

      Finders
        Agreement between George Logan, and BPOMS dated September 15, 2006; and Letter
        Agreement between BPOMS and C.E. Unterberg, Towbin, LLC dated November 1,
        2006.

      

      For
        initial funding C. E. Unterberg will receive $980,000 cash at closing and
        700,000 warrants with an exercise price of $0.60. Additional fees are due
        if the
        Purchasers exercise options or additional investment rights. 

      

      For
        initial funding George Logan will receive $280,000 cash at closing and 466,667
        warrants with an exercise price of $0.60. No additional fees are due if the
        Purchasers exercise options or additional investment rights. 

       

      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(q)

      DISCLOSURE

       

      

       

      No
        disclosure required.

       

      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(r)

      INTELLECTUAL
        PROPERTY (IP)

       

      

       

      

      Schedule
        2.1(r)(i) - Intellectual Property

      

      

      IP
        on Products and Tools owned by BPOMS

      
        	 	
                1.

              	
                eReview
                  Web-based View, Markup and Print
                  applet

              

      

      
        	 	
                2.

              	
                eReview
                  Synchronous and Asynchronous Collaboration Server and
                  Services

              

      

      
        	 	
                3.

              	
                eReview
                  Viewlets - a combination of Applet, Application, Web
                  Service.

              

      

      
        	 	
                4.

              	
                eReview
                  Java Beans for Windows ActiveX
                  controls

              

      

      
        	 	
                5.

              	
                eReview
                  Standalone Application that view, annotate and print desktop
                  documents

              

      

      
        	 	
                6.

              	
                eReview
                  embedded Desktop/Application Sharing for Windows Operating
                  System.

              

      

      
        	 	
                7.

              	
                eReview
                  embedded web casting for online end user
                  training

              

      

      
        	 	
                8.

              	
                eReview
                  audio conference over HTTP

              

      

      
        	 	
                9.

              	
                WebWorks
                  multi tenant document management for
                  ECM

              

      

      
        	 	
                10.

              	
                WebWorks
                  project management for Microsoft Project
                  Files

              

      

      
        	 	
                11.

              	
                eReview
                  Collaboration Portal (ECP) a simplified document collaboration
                  platform

              

      

      
        	 	
                12.

              	
                ForReview
                  to view, annotate and print tool for both Windows and UNIX operating
                  systems.

              

      

      
        	 	
                13.

              	
                ForReview
                  plug-ins for Netscape and IE
                  browsers.

              

      

      
        	 	
                14.

              	
                Rendition
                  Server (RS) core engine to convert document from one format to
                  the other
                  format for easy viewing.

              

      

      
        	 	
                15.

              	
                RS
                  Interactive Web service to publish the lightweight Document viewable
                  on
                  the Internet, leveraging the SOAP mechanism and remote Conversion
                  process.

              

      

      
        	 	
                16.

              	
                UGRemarks
                  to view and annotate UNIGRAFIX
                  files

              

      

      
        	 	
                17.

              	
                Online
                  license manager to generate and distribute
                  licenses

              

      

      
        	 	
                18.

              	
                eReview
                  print server to implement remote printer
                  access

              

      

      
        	 	
                19.

              	
                ADAPScan
                  document scanning and image processing
                  application

              

      

      
        	 	
                20.

              	
                ADAPFile
                  web-based document storage and retrieval
                  application

              

      

      
        	 	
                21.

              	
                DM
                  Importer custom import tool for OpenText
                  eDocs

              

      

      

      IP
        on Integrations owned by BPOMS

      The
        following integrations to several products and platforms are written and
        owned
        by BPOMS. However, each product and platform mentioned below is owned by
        the
        respective maker of the software.

      

      
        	 	
                1.

              	
                View,
                  Annotation, Print and Collaboration integration with EDM, PDM and
                  ECM
                  products. List of supported products are as listed
                  below.

              

      

      
        	 	
                I.

              	
                Matrix
                  One PDM web interfaces - CWI, Engineering Central, Product Central,
                  Program Central and other centrals.

              

      

      
        	 	
                II.

              	
                Documentum
                  4.i and 5.i EDM web interfaces - WebTop, Right Site,
                  Intranet.

              

      

      
        	 	
                III.

              	
                FileNet
                  ECM web interfaces - Image Services Open Client, Workplace, and
                  Government.

              

      

      
        	 	
                IV.

              	
                OpenText
                  Livelink ECM web interfaces - WebTop, DM
                  Extensions.

              

      

      
        	 	
                V.

              	
                Xerox
                  DocuShare ECM

              

      

      
        	 	
                VI.

              	
                Oracle
                  Content Service - Oracle Files, Oracle
                  CMSDK

              

      

      
        	 	
                VII.

              	
                Alfresco
                  CMS web interface

              

      

      
        	 	
                VIII.

              	
                Adapfile
                  CMS we interface

              

      

      
        	 	
                IX.

              	
                Primavera
                  project document manager web
                  interface

              

      

      
        	 	
                X.

              	
                IBM
                  Workplace web interface

              

      

      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

      

      
        	 	
                2.

              	
                Real-time
                  synchronous or asynchronous document centric meeting integration
                  with
                  various third party collaborative solutions. List of supported
                  product are
                  as listed below:

              

      

      
        	 	
                I.

              	
                Team
                  Central from Matrix One

              

      

      
        	 	
                II.

              	
                Team
                  Collaboration Center from FileNet

              

      

      
        	 	
                III.

              	
                Constructware
                  On-line document collaboration.

              

      

      
        	 	
                IV.

              	
                eBuild
                  On-Line document collaboration.

              

      

      
        	 	
                V.

              	
                LG
                  Engineering On-Line document
                  collaboration.

              

      

      
        	 	
                VI.

              	
                Tejari
                  Projects On-Line document
                  collaboration.

              

      

      

      
        	 	
                3.

              	
                Technology
                  Integrations

              

      

      
        	 	
                I.

              	
                ME10
                  file conversion integration for Agilent
                  Technology

              

      

      
        	 	
                II.

              	
                Xerox
                  CGM printer driver integration

              

      

      
        	 	
                III.

              	
                EMF
                  printer driver enhancement for Sharp Print
                  Manager

              

      

      
        	 	
                IV.

              	
                DWF
                  file format viewer integration with
                  BIW-Viewer.

              

      

      
        	 	
                V.

              	
                PDF
                  file format viewer integration.

              

      

      
        	 	
                VI.

              	
                HPGL
                  and HPGL2 file format viewer
                  integration

              

      

      
        	 	
                VII.

              	
                Open
                  Office viewer integration with
                  eReview

              

      

      
        	 	
                VIII.

              	
                Outside
                  IN Inso viewer integration with
                  eReview

              

      

      
        	 	
                IX.

              	
                Open
                  DWG viewer integration with eReview

              

      

      
        	 	
                X.

              	
                Open
                  DGN viewer integration with eReview

              

      

      
        	 	
                XI.

              	
                Snowbound
                  raster library integration with eReview and ForReview
                  

              

      

      
        	 	
                XII.

              	
                Apache
                  FOP integration to generate PDF
                  reports

              

      

      
        	 	
                XIII.

              	
                Lotus
                  Domino Customization and
                  integration

              

      

      
        	 	
                XIV.

              	
                Java
                  3D viewer integration

              

      

      
        	 	
                XV.

              	
                ECAD
                  viewer integration

              

      

      

      Software
        Trademarks

      

      
        	 	
                I.

              	
                ForReview
                  TM

              

      

      
        	 	
                II.

              	
                ADAPScan
                  TM

              

      

      

      

      Software
        Patents (pending)

      
        	 	
                I.

              	
                eReview
                  Synchronous and Asynchronous Document Collaboration - Patent
                  pending

              

      

      

      Software
        Design Models

      
        	 	
                I.

              	
                View,
                  Annotate and Print from both central repository and local hard
                  drive in a
                  collaborative design model

              

      

      
        	 	
                II.

              	
                Software
                  API orientation to make the product available for external developers
                  to
                  customize and reprogram the base
                  product.

              

      

      
        	 	
                III.

              	
                Web
                  services implemented to enhance API access to product
                  information

              

      

      
        	 	
                IV.

              	
                Consolidate
                  distributed printers to provide maximum usage to end
                  user

              

      

      
        	 	
                V.

              	
                Collaborative
                  Electronic Document Management and Project Management using ECP
                  and
                  WebWorks

              

      

      

      

      

      eReview
        and ForReview Optional Third Party Licenses

      
        	 	
                1.

              	
                Snowbound
                  (Raster)

              

      

      
        	 	
                2.

              	
                Stellent/Inso
                  (MS Office formats)

              

      

      
        	 	
                3.

              	
                Artifex's
                  Ghostscript (Postscript)

              

      

      
        	 	
                4.

              	
                3D
                  Viewer Engine

              

      

      
        	 	
                5.

              	
                ME-10
                  Converter

              

      

      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      

      
        	 	
                6.

              	
                SolidWorks
                  Converter

              

      

      
        	 	
                7.

              	
                Pro-E
                  Converter

              

      

      
        	 	
                8.

              	
                Unigraphix
                  Converter

              

      

      

      eReview
        and ForReview Open Source Licenses

      
        	 	
                1.

              	
                Open
                  Design DWG

              

      

      
        	 	
                2.

              	
                Open
                  Design DGN

              

      

      
        	 	
                3.

              	
                Open
                  Office tool kit

              

      

      
        	 	
                4.

              	
                Sun
                  Java

              

      

      
        	 	
                5.

              	
                Microsoft
                  MFC Library

              

      

      
        	 	
                6.

              	
                Microsoft
                  .net Library

              

      

      
        	 	
                7.

              	
                My-SQL
                  Database

              

      

      

      ADAPScan
        Third Party Licenses

      1.
        Kofax
        ImageControls

      

      

      

      Schedule
        2.1(r)(ii) - Infringement

       

      No
        disclosure required.

      

       

      Schedule
        2.1(r)(iii) - Intellectual Property Rights and Licenses

       

      No
        disclosure required.

       

      Schedule
        2.1(r)(iv)- Contents

       

      No
        disclosure required.

      

       

      Schedule
        2.1(r)(v)-1-Licensing Fees, Royalties and Other Payments 

       

      No
        disclosure required.

       

      Schedule
        2.1(r)(v)-2
        -
        Maintenance Fees

       

      No
        disclosure required.

       

      

       

      Schedule
        2.1(r)(vi) - Software Rights 

       

      Licensed
        Software Used in BPOMS

      

      
        	 	
                1.

              	
                Microsoft
                  Windows 2000, XP Professional, 2003 Server, 2000 Server, Windows
                  NT

              

      

      
        	 	
                2.

              	
                Microsoft
                  Office XP Professional

              

      

      
        	 	
                3.

              	
                Visual
                  Studio 6.0

              

      

      
        	 	
                4.

              	
                Visual
                  Studio 2005

              

      

      
        	 	
                5.

              	
                MS
                  SQL 97, 2005

              

      

      
        
           

        

        
          -22-

          
            

          

        

        
           

        

      

      
        	 	
                6.

              	
                Microsoft
                  Project 2000

              

      

      
        	 	
                7.

              	
                Microsoft
                  Visio 2000

              

      

      
        	 	
                8.

              	
                Visual
                  Age 3.1

              

      

      
        	 	
                9.

              	
                RoboHelp

              

      

      
        	 	
                10.

              	
                Out
                  Look Express

              

      

      
        	 	
                11.

              	
                Quick
                  Book

              

      

      
        	 	
                12.

              	
                Great
                  Plains

              

      

      
        	 	
                13.

              	
                Ceridian

              

      

      
        	 	
                14.

              	
                Citrix

              

      

      
        	 	
                15.

              	
                VMWare

              

      

      
        	 	
                16.

              	
                Lotus
                  Notes eMail Server

              

      

      
 

      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(s)

      ENVIRONMENTAL
        COMPLIANCE

       

      No
        disclosure required.

       

      
        
           

        

        
          -24-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(t)

      BOOKS
        AND RECORDS; INTERNAL ACCOUNTING CONTROLS

       

      

       

      No
        disclosure required.

       

      
        
           

        

        
          -25-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(u)

       

      MATERIAL
        AGREEMENTS

       

      No
        disclosure required.

       

      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(v)

       

      TRANSACTIONS
        WITH AFFILIATES

       

      
        	 	
                1.

              	
                On
                  August 18, 2006 BPOMS entered into a Bridge Loan Agreement with
                  Patrick
                  Dolan and James Cortens (“Founders”) which provides in part that the
                  Founders may make bridge loans to BPOMS and which entitles the
                  Founders to
                  receive common stock warrants, as described in such Bridge Loan
                  Agreement.
                  

              

      

       

      
        	 	
                2.

              	
                On
                  August 18, 2006 BPOMS, Brian Meyer, Donald West, Patrick Dolan
                  and James
                  Cortens entered into a Participation Agreement which provides for
                  the
                  right of Brian Meyer and Donald West to receive common stock warrants
                  and
                  Series C Preferred Stock in accordance with the terms of the
                  above-described Bridge Loan Agreement and such other terms as described
                  in
                  such Participation Agreement. 

              

      

       

      
        	 	
                3.

              	
                BPOMS’s
                  primary Canadian legal counsel is Don West, a partner at Aird and
                  Berlis,
                  LLP, a law firm located in Toronto Canada. Such firm charged BPOMS
                  approximately $200,000 over the past year. Don West is also a shareholder
                  of BPOMS who together with his wife and trust owns 907,781 shares
                  of
                  Preferred Series B stock, 1,012,091 shares of common stock and
                  5,435
                  warrants to purchase common stock.

              

      

       

      
        	 	
                4.

              	
                Employee
                  Agreements, as follows:

              

      

       

      
        	 	
                (a)

              	
                Employment
                  Agreement between BPOMS and Patrick Dolan dated July 29, 2005;
                  

              

      

       

      
        	 	
                (b)

              	
                Employment
                  Agreement between BPOMS and James Cortens dated July 29, 2005;
                  

              

      

       

      
        	 	
                (c)

              	
                Employment
                  Agreement between Digica, Inc. and Kevin J. Smith dated December
                  30, 2005;
                  

              

      

       

      
        	 	
                (d)

              	
                Employment
                  Agreement between Digica, Inc. and Robert G. Bisci dated December
                  30,
                  2005; 

              

      

       

      
        	 	
                (e)

              	
                Employment
                  Agreements between BPOMS and Thomas E. Lucas dated November 1,
                  2005;
                  

              

      

       

      
        	 	
                (f)

              	
                Employment
                  Agreement dated October 2, 2006 between Novus Imaging Solutions,
                  Inc., a
                  Manitoba corporation, and James
                  Buchanan;

              

      

      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

       

      
        	 	
                (g)

              	
                Employment
                  Agreement between BPOMS and Koushik Dutta dated December 15, 2006;
                  

              

      

       

      
        	 	
                (h)

              	
                Employment
                  Agreement between BPOMS and Don Rutherford dated January 26, 2007.
                  

              

      

       

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(w)

      COMPLIANCE
        WITH SECURITIES LAWS

       

      No
        disclosure required.

       

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(x)

      GOVERNMENTAL
        APPROVALS

       

      No
        disclosure required.

       

      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(y)

      EMPLOYEES

       

      No
        disclosure required.

       

      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(z)

      ABSENCE
        OF CERTAIN DEVELOPMENTS

      

      400,000
        stock options were provided to Don Rutherford in connection with his employment
        agreement on April 16, 2007.

       

      75,000
        stock options were provided to Koushik Dutta in connection with his employment
        agreement on April 16, 2007.

       

      33,012
        stock options were provided to Dale Paisley in connection with his Board
        position with the Company on April 16, 2007.

       

      Capital
        lease as reflected in the Company’s 3/31/07 10QSB.

       

      $400,000
        bridge loan made on January 30, 2007 by ITO Solutions LLC (wholly owned by
        Patrick Dolan) to the Company. Terms are 9% interest only loan, payable monthly
        with a two year maturity date.

       

      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(aa)

      INVESTMENT
        COMPANY ACT STATUS

       

      No
        disclosure required.

       

      
        
           

        

        
          -33-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(bb)

      ERISA

       

      No
        disclosure required.

       

       

      
        
           

        

        
          -34-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(cc)

      DILUTIVE
        EFFECT

       

      No
        disclosure required.

       

      
        
           

        

        
          -35-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(dd)

      NO
        INTEGRATED OFFERING

       

      No
        disclosure required.

       

      
        
           

        

        
          -36-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(ee)

      SARBANES-OXLEY
        COMPLIANCE

       

      No
        disclosure required.

       

       

      
        
           

        

        
          -37-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(ff)

      TRANSFER
        AGENT

      

      American
        Stock Transfer and Trust Company

      59
        Maiden
        Lane

      Plaza
        Level

      New
        York,
        NY 10038

      

      Barry
        Rosenthal

      (718)
        921-8381 phone

      (718)
        765-8718 fax

      brosenthal@AMSTOCK.com

       

      
        
           

        

        
          -38-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(gg)

      INDEPENDENT
        NATURE OF PURCHASERS

       

      No
        disclosure required.

       

       

      
        
           

        

        
          -39-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(hh)

      GENERAL
        SOLICITATION; PLACEMENT AGENT’S FEES

       

      No
        disclosure required.

       

      
        
           

        

        
          -40-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(jj)

      INSURANCE

       

      No
        disclosure required.

       

      
        
           

        

        
          -41-

          
            

          

        

        
           

        

      

       

      Schedule
        2.1(kk)

      FOREIGN
        CORRUPT PRACTICES

       

      No
        disclosure required.

       

       

      
        
           

        

        
          -42-

          
            

          

        

        
           

        

      

       

      Schedule
        3.11

      USE
        OF PROCEEDS

       

      Acquisition
        of a private entity providing data center outsourcing services to clients
        located throughout the US for the past 10+ years

       

      Acquisition
        of DocuCom Imaging Solutions Inc.

       

      Acquisition
        of Human Resource MicroSystems, Inc.

       

      Novus
        Imaging Solutions, Inc. deferred purchase price

       

      ADAPSYS
        severance claims

       

      Note
        payable to Das Family Holdings

       

      Cash
        payment to C.E. Unterberg, Towbin resulting from investment banking services
        related to this financing activity

       

      Cash
        payment to George Logan resulting from Finder’s Fee agreement related to this
        financing activity

       

      
        
           

        

        
          -43-

          
            

          

        

        
           

        

      

      Schedule
        3.11

      PERMITTED
        INDEBTEDNESS

       

      A
        line of
        credit or other bank debt on commercially reasonable terms not to exceed
        $7,000,000 that is used solely for the acquisition of a private entity providing
        data center outsourcing services to clients located throughout the US for
        the
        past 10+ years.

       

       

      
        
           

        

        
          -44-

          
            

          

        

        
           

        

      

       

      Schedule
        3.21

      LOCK-UP
        AGREEMENT

       

       

      Patrick
        Dolan

       

      Jim
        Cortens

       

      George
        Logan

       

      Brian
        Meyer

       

      Lynne
        Meyer

       

      Ray
        Belisle

       

      Don
        West

       

      Sharon
        West

       

      West
        LTP
        Trust

       

      Tom
        Lucas

       

      Bob
        Bisci

      

      Michele
        Bisci

      

      Kevin
        Smith

      

      Julie
        Smith

      

      John
        Lalli

       

      Harold
        Hermann

       

      Koushik
        Dutta

       

      Don
        Rutherford

       

      Dale
        Paisley

       

      
        
           

        

        
          -45-REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of June 13, 2007, by and among BPO Management Services,
      Inc., a Delaware corporation (the “Company”),
      and
      the purchasers listed on Schedule
      I
      hereto
      (the “Purchasers”).

    

    This
      Agreement is being entered into pursuant to the Series D Convertible Preferred
      Stock Purchase Agreement dated as of the date hereof among the Company and
      the
      Purchasers (the “Purchase
      Agreement”).

    

    The
      Company and the Purchasers hereby agree as follows:

    

    1. Definitions.

    

    Capitalized
      terms used and not otherwise defined herein shall have the meanings given such
      terms in the Purchase Agreement. As used in this Agreement, the following terms
      shall have the following meanings:

    

    “415
      Notice”
      shall
      have the meaning set forth in Section 2(b).

    

    “Acquisition
      Shares”
means
      unregistered shares of Common Stock issued by the Company as consideration
      for
      an Acquisition (as defined in the Purchase Agreement). 

    

    “Advice”
shall
      have the meaning set forth in Section 3(m).

    

    “Affiliate”
means,
      with respect to any Person, any other Person that directly or indirectly
      controls or is controlled by or under common control with such Person. For
      the
      purposes of this definition, “control,”
when
      used with respect to any Person, means the possession, direct or indirect,
      of
      the power to direct or cause the direction of the management and policies of
      such Person, whether through the ownership of voting securities, by contract
      or
      otherwise; and the terms of “affiliated,”
      “controlling”
and
      “controlled”
have
      meanings correlative to the foregoing.

    

    “Board”
shall
      have meaning set forth in Section 3(n).

    

    “Business
      Day”
means
      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 generally are
      authorized or required by law or other government actions to close.

    

    “Closing
      Date”
means
      the date of the closing of the purchase and sale of the Preferred Stock and
      the
      Warrants pursuant to the Purchase Agreement.

    

    “Commission”
means
      the Securities and Exchange Commission.

    

    “Common
      Stock”
means
      the Company’s Common Stock, par value $0.01 per share.

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    “Effectiveness
      Date”
means,
      subject to Section 2(b) hereof, with respect to the Registration Statement
      the
      earlier of (A) the one hundred twentieth (120th)
      day
      following the Closing Date (or in the event the Registration Statement receives
      a “full review” by the Commission, the one hundred fiftieth (150th)
      day
      following the Closing Date) or (B) the
      date
      which is within three (3) Business Days after the date on which the Commission
      informs the Company (i) that the Commission will not review the Registration
      Statement or (ii) that
      the
      Company may request the acceleration of the effectiveness of the Registration
      Statement and the Company makes such request; provided that,
      if the
      Effectiveness Date falls on a Saturday,
      Sunday or any other day which shall be a legal holiday or a day on which the
      Commission is authorized or required by law or other government actions to
      close, the Effectiveness Date shall be the following Business Day.

    

    “Effectiveness
      Period”
shall
      have the meaning set forth in Section 2.

    

    “Event”
shall
      have the meaning set forth in Section 7(e).

    

    “Event
      Date”
shall
      have the meaning set forth in Section 7(e).

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

    “Filing
      Date”
means,
      subject to Section 2(b) hereof, the thirtieth (30th)
      day
      following the Closing Date;
      provided that,
      if the
      Filing Date falls on a Saturday,
      Sunday or any other day which shall be a legal holiday or a day on which the
      Commission is authorized or required by law or other government actions to
      close, the Filing Date shall be the following Business Day. 

    

    “Holder”
or
      “Holders”
means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

    

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 5(c).

    

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 5(c).

    

    “Losses”
shall
      have the meaning set forth in Section 5(a).

    

    “NASD”
means
      the National Association of Securities Dealers, Inc.

    

    “Person”
means
      an individual or a corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or political subdivision thereof) or
      other entity of any kind.

    

    “Preferred
      Stock”
means
      shares of the Company’s Series D Convertible Preferred Stock issued to the
      Purchasers pursuant to the Purchase Agreement and shares of the Company’s Series
      D-2 Convertible Preferred Stock issued to the Purchasers upon exercise of the
      Series J Warrants.

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

    

    “Prospectus”
means
      the prospectus included in the Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by the Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference in such
      Prospectus.

    

    “Registrable
      Securities”
means
      the shares of Common Stock issuable upon conversion of the Preferred Stock
      and
      any dividends accrued or payable thereon plus the shares of Common Stock
      issuable upon exercise of the Warrants.

    

    “Registration
      Statement”
means
      the registration statements and any additional registration statements
      contemplated by Section 2, including (in each case) the Prospectus, amendments
      and supplements to such registration statement or Prospectus, including pre-
      and
      post-effective amendments, all exhibits thereto, and all material incorporated
      by reference in such registration statement.

    

    “Rule
      144”
means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Rule
      158”
means
      Rule 158 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Rule
      415”
means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Rule
      424”
means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Schedule
      II Shares”
shall
      have the meaning set forth in Section 2(a).

    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    

    “Special
      Counsel”
means
      Sheppard, Mullin, Richter & Hampton LLP, for which the Holders will be
      reimbursed by the Company pursuant to Section 4.

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    “VWAP”
means,
      for any date, (i) the daily volume weighted average price of the Common Stock
      for such date on the OTC Bulletin Board as reported by Bloomberg Financial
      L.P.
      (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time);
      (ii) if the Common Stock is not then quoted on the OTC Bulletin Board and
      if prices for the Common Stock are then reported in the “Pink Sheets” published
      by the Pink Sheets, LLC (or a similar organization or agency succeeding to
      its
      functions of reporting prices), the most recent bid price per share of the
      Common Stock so reported; or (iii) in all other cases, the fair market
      value of a share of Common Stock as determined by an independent appraiser
      selected in good faith by the Holder and reasonably acceptable to the
      Company.

    

    “Warrants”
means
      the warrants to purchase shares of Common Stock and the warrants to purchase
      shares of the Company’s Series D-2 Convertible Preferred Stock, all issued to
      the Purchasers pursuant to the Purchase Agreement.

    

    2. Resale
      Registration.

    

    (a) On
      or
      prior to the Filing Date, the Company shall prepare and file with the Commission
      a “resale” Registration Statement providing for the resale of all Registrable
      Securities for an offering to be made on a continuous basis pursuant to Rule
      415. The Registration Statement shall be on Form SB-2 (except if the Company
      is
      not then eligible to register for resale the Registrable Securities on Form
      SB-2, in which case such registration shall be on another appropriate form
      in
      accordance herewith and with the Securities Act and the rules promulgated
      thereunder). Such Registration Statement shall cover to the extent allowable
      under the Securities Act and the rules promulgated thereunder (including Rule
      416), such indeterminate number of additional shares of Common Stock resulting
      from stock splits, stock dividends or similar transactions with respect to
      the
      Registrable Securities. The Company shall (i) not permit any securities other
      than the Registrable Securities and the securities listed on Schedule
      II
      hereto
      (the “Schedule
      II Shares”)
      to be
      included in the Registration Statement and (ii) use its best efforts to cause
      the Registration Statement to be declared effective under the Securities Act
      as
      promptly as possible after the filing thereof, but in any event prior to the
      Effectiveness Date, and to keep such Registration Statement continuously
      effective under the Securities Act until such date as is the earlier of (x)
      the
      date when all Registrable Securities covered by such Registration Statement
      have
      been sold or (y) the date on which the Registrable Securities may be sold
      without any restriction pursuant to Rule 144(k) as determined by the counsel
      to
      the Company pursuant to a written opinion letter, addressed to the Company’s
      transfer agent to such effect (the “Effectiveness
      Period”).
      The
      Company shall request that the effective time of the Registration Statement
      is
      4:00 p.m. Eastern Time on the effective date. If at any time and for any reason,
      an additional Registration Statement is required to be filed because at such
      time the actual number of shares of Common Stock into which the Preferred Stock
      is convertible and the Warrants are exercisable plus the number of shares of
      Common Stock exceeds the number of shares of Registrable Securities remaining
      under the Registration Statement, the Company shall have twenty (20) Business
      Days to file such additional Registration Statement, and the Company shall
      use
      its best efforts to cause such additional Registration Statement to be declared
      effective by the Commission as soon as possible, but in no event later than
      ninety (90) days after filing. 

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    (b) Notwithstanding
      anything to the contrary set forth in this Section 2, in the event the
      Commission does not permit the Company to register all of the Registrable
      Securities in the Registration Statement because of the Commission’s application
      of Rule 415 (a “415
      Notice”),
      the
      Company shall, within ten (10) days of receipt of the 415 Notice, register
      in
      the Registration Statement such number of Registrable Securities as is permitted
      by the Commission, provided,
      however,
      that
      all of the Schedule II Shares shall be excluded from such Registration Statement
      and the Registrable Securities to be included in such Registration Statement
      or
      any subsequent registration statement shall be determined in the following
      order: (i) first, the shares of Common Stock issuable upon conversion of the
      Preferred Stock shall be registered on a pro rata basis among the holders of
      the
      Preferred Stock, (ii) second, the shares of Common Stock issuable upon
      conversion of the Series D-2 Convertible Preferred Stock that are issuable
      upon
      exercise of the Series J Warrants shall be registered on a pro rata basis among
      the holders of the Series J Warrants, and (iii) third, the shares of Common
      Stock issuable upon exercise of the remaining Warrants shall be registered
      on a
      pro rata basis among the holders of such remaining Warrants. In the event the
      Commission does not permit the Company to register all of the Registrable
      Securities in the initial Registration Statement, the Company shall use its
      best
      efforts to file subsequent Registration Statements to register the Registrable
      Securities that were not registered in the initial Registration Statement as
      promptly as possible and in a manner permitted by the Commission. For purposes
      of this Section 2(b), “Filing
      Date”
      means
      with respect to each subsequent Registration Statement filed pursuant hereto,
      the
      later
      of (i) ninety (90) days following the sale of substantially all of the
      Registrable Securities included in the initial Registration Statement or any
      subsequent Registration Statement and (ii) six (6) months following the
      effective date of the initial Registration Statement or any subsequent
      Registration Statement, as applicable, or such earlier date as permitted by
      the
      Commission. For
      purposes of this Section 2(b), “Effectiveness
      Date”
means
      with respect to each subsequent Registration Statement filed pursuant hereto,
      the earlier of (A)
      the
      one hundred twentieth (120th)
      day
      following the filing date of such Registration Statement (or in the event such
      Registration Statement receives a “full review” by the Commission, the one
      hundred fiftieth (150th)
      day
      following such filing date) or (B) the date which is within three (3) Business
      Days after the date on which the Commission informs the Company (i) that the
      Commission will not review such Registration Statement or (ii) that
      the
      Company may request the acceleration of the effectiveness of such Registration
      Statement and the Company makes such request; provided that,
      if the
      Effectiveness Date falls on a Saturday, Sunday or any other day which shall
      be a
      legal holiday or a day on which the Commission is authorized or required by
      law
      or other government actions to close, the Effectiveness Date shall be the
      following Business Day.

    

    3. Registration
      Procedures.

    

      In
      connection with the Company’s registration obligations hereunder, the Company
      shall:

     

    (a)
       Prepare
      and file with the Commission, on or prior to the Filing Date, a Registration
      Statement on Form SB-2 (or if the Company is not then eligible to register
      for
      resale the Registrable Securities on Form SB-2 such registration shall be on
      another appropriate form in accordance herewith and with the Securities Act
      and
      the rules promulgated thereunder) in accordance with the plan of distribution
      as
      set forth on Exhibit
      A
      hereto
      and in accordance with

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    applicable
      law, regulations and Commission policies, and cause the Registration Statement
      to become effective and remain effective as provided herein; provided,
      however,
      that
      not less than three (3) Business Days prior to the filing of the Registration
      Statement or any related Prospectus or any amendment or supplement thereto,
      the
      Company shall (i) furnish to the Holders and any Special Counsel, copies of
      all
      such documents proposed to be filed, which documents will be subject to the
      review of such Holders and such Special Counsel, and (ii) cause its officers
      and
      directors, counsel and independent registered public accounting firm to respond
      to such inquiries as shall be necessary, in the reasonable opinion of Special
      Counsel, to conduct a reasonable review of such documents. The Company shall
      not
      file the Registration Statement or any such Prospectus or any amendments or
      supplements thereto to which the Holders of a majority of the Registrable
      Securities or any Special Counsel shall reasonably object in writing within
      three (3) Business Days of their receipt thereof.

    

    (b) (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to the Registration Statement as may be necessary to keep the
      Registration Statement continuously effective as to the applicable Registrable
      Securities for the Effectiveness Period and prepare and file with the Commission
      such additional Registration Statements in order to register for resale under
      the Securities Act all of the Registrable Securities; (ii) cause the related
      Prospectus to be amended or supplemented by any required Prospectus supplement,
      and as so supplemented or amended to be filed pursuant to Rule 424 (or any
      similar provisions then in force) promulgated under the Securities Act; (iii)
      respond as promptly as possible, but in no event later than ten (10) Business
      Days, to any comments received from the Commission with respect to the
      Registration Statement or any amendment thereto and as promptly as possible
      provide the Holders true and complete copies of all correspondence from and
      to
      the Commission relating to the Registration Statement; (iv) file the final
      prospectus pursuant to Rule 424 of the Securities Act no later than 9:00 a.m.
      Eastern Time on the Business Day following the date the Registration Statement
      is declared effective by the Commission; and (v) comply in all material respects
      with the provisions of the Securities Act and the Exchange Act with respect
      to
      the disposition of all Registrable Securities covered by the Registration
      Statement during the Effectiveness Period in accordance with the intended
      methods of disposition by the Holders thereof set forth in the Registration
      Statement as so amended or in such Prospectus as so supplemented.

    

    (c) Notify
      the Holders of Registrable Securities and any Special Counsel as promptly as
      possible (and, in the case of (i)(A) below, not less than three (3) days prior
      to such filing, and in the case of (iii) below, on the same day of receipt
      by
      the Company of such notice from the Commission) and (if requested by any such
      Person) confirm such notice in writing no later than two (2) Business Days
      following the day (i)(A) when a Prospectus or any Prospectus supplement or
      post-effective amendment to the Registration Statement is filed; (B) when the
      Commission notifies the Company whether there will be a “review” of such
      Registration Statement and whenever the Commission comments in writing on such
      Registration Statement and (C) with respect to the Registration Statement or
      any
      post-effective amendment, when the same has become effective; (ii) of any
      request by the Commission or any other Federal or state governmental authority
      for amendments or supplements to the Registration Statement or Prospectus or
      for
      additional information; (iii) of the issuance by the Commission of any stop
      order suspending the effectiveness of the Registration Statement covering any
      or
      all of the

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    Registrable
      Securities or the initiation or threatening of any Proceedings for that purpose;
      (iv) if at any time any of the representations and warranties of the Company
      contained in any agreement contemplated hereby ceases to be true and correct
      in
      all material respects; (v) of the receipt by the Company of any notification
      with respect to the suspension of the qualification or exemption from
      qualification of any of the Registrable Securities for sale in any jurisdiction,
      or the initiation or threatening of any Proceeding for such purpose; and (vi)
      of
      the occurrence of any event that makes any statement made in the Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to the Registration Statement, Prospectus or other
      documents so that, in the case of the Registration Statement or the Prospectus,
      as the case may be, it will not contain any untrue statement of a material
      fact
      or omit to state any material fact required to be stated therein or necessary
      to
      make the statements therein, in the light of the circumstances under which
      they
      were made, not misleading.

    

      (d) Use
      its
      best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
      of,
      as promptly as possible, (i) any order suspending the effectiveness of the
      Registration Statement or (ii) any suspension of the qualification (or exemption
      from qualification) of any of the Registrable Securities
      for sale in any jurisdiction.

    

    (e) If
      requested by the Holders of a majority in interest of the Registrable
      Securities, (i) promptly incorporate in a Prospectus supplement or
      post-effective amendment to the Registration Statement such information as
      the
      Company reasonably agrees should be included therein and (ii) make all required
      filings of such Prospectus supplement or such post-effective amendment as soon
      as practicable after the Company has received notification of the matters to
      be
      incorporated in such Prospectus supplement or post-effective
      amendment.

    

    (f) If
      requested by any Holder, furnish to such Holder and any Special Counsel, without
      charge, at least one conformed copy of each Registration Statement and each
      amendment thereto, including financial statements and schedules, all documents
      incorporated or deemed to be incorporated therein by reference, and all exhibits
      to the extent requested by such Person (including those previously furnished
      or
      incorporated by reference) promptly after the filing of such documents with
      the
      Commission.

    

    (g) Promptly
      deliver to each Holder and any Special Counsel, without charge, as many copies
      of the Prospectus or Prospectuses (including each form of prospectus) and each
      amendment or supplement thereto as such Persons may reasonably request; and
      subject to the provisions of Sections 3(m) and 3(n), the Company hereby consents
      to the use of such Prospectus and each amendment or supplement thereto by each
      of the selling Holders in connection with the offering and sale of the
      Registrable Securities covered by such Prospectus and any amendment or
      supplement thereto.

    

    (h) Prior
      to
      any public offering of Registrable Securities, use its best efforts to register
      or qualify or cooperate with the selling Holders and any Special Counsel in
      connection with the registration or qualification (or exemption from such
      registration or qualification) of such Registrable Securities for offer and
      sale
      under the securities or Blue Sky laws of such jurisdictions within the United
      States as any Holder requests in writing, to keep each such

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    registration
      or qualification (or exemption therefrom) effective during the Effectiveness
      Period and to do any and all other acts or things necessary or advisable to
      enable the disposition in such jurisdictions of the Registrable Securities
      covered by a Registration Statement; provided,
      however,
      that
      the Company shall not be required to qualify generally to do business in any
      jurisdiction where it is not then so qualified or to take any action that would
      subject it to general service of process in any such jurisdiction where it
      is
      not then so subject or subject the Company to any material tax in any such
      jurisdiction where it is not then so subject.

    

      (i) Cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be sold pursuant to a
      Registration Statement, which certificates, to the extent permitted by the
      Purchase Agreement and applicable federal and state securities laws, shall
      be
      free of all restrictive legends, and to enable such Registrable Securities
      to be
      in such denominations and registered in such names as any Holder may request
      in
      connection with any sale of Registrable Securities.

    

    (j) Upon
      the
      occurrence of any event contemplated by Section 3(c)(vi), as promptly as
      possible, prepare a supplement or amendment, including a post-effective
      amendment, to the Registration Statement or a supplement to the related
      Prospectus or any document incorporated or deemed to be incorporated therein
      by
      reference, and file any other required document so that, as thereafter
      delivered, neither the Registration Statement nor such Prospectus will contain
      an untrue statement of a material fact or omit to state a material fact required
      to be stated therein or necessary to make the statements therein, in the light
      of the circumstances under which they were made, not misleading.

    

    (k) Use
      its
      best efforts to cause all Registrable Securities relating to the Registration
      Statement to be quoted on the OTC Bulletin Board or any other securities
      exchange, quotation system or market, if any, on which similar securities issued
      by the Company are then listed, quoted or traded as and when required pursuant
      to the Purchase Agreement.

    

    (l) Comply
      in
      all material respects with all applicable rules and regulations of the
      Commission and make generally available to its security holders all documents
      filed or required to be filed with the Commission, including, but not limited,
      to, earning statements satisfying the provisions of Section 11(a) of the
      Securities Act and Rule 158 not later than 90 days after the end of any 12-month
      period if such period is a fiscal year commencing on the first day of the first
      fiscal quarter of the Company after the effective date of the Registration
      Statement, which statement shall conform to the requirements of Rule 158.

    

    (m) The
      Company may require each selling Holder to furnish to the Company information
      regarding such Holder and the distribution of such Registrable Securities as
      is
      required by law to be disclosed in the Registration Statement, Prospectus,
      or
      any amendment or supplement thereto, and the Company may exclude from such
      registration the Registrable Securities of any such Holder who unreasonably
      fails to furnish such information within a reasonable time after receiving
      such
      request.

    

    If
      the
      Registration Statement refers to any Holder by name or otherwise as the holder
      of any securities of the Company, then such Holder shall have the right to
      require (if such

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    reference
      to such Holder by name or otherwise is not required by the Securities Act or
      any
      similar federal or applicable state law then in force) the deletion of the
      reference to such Holder in any amendment or supplement to the Registration
      Statement filed or prepared subsequent to the time that such reference ceases
      to
      be required.

    

    Each
      Holder covenants and agrees that it will not sell any Registrable Securities
      under the Registration Statement until the Company has electronically filed
      the
      Prospectus as then amended or supplemented as contemplated in Section 3(g)
      and
      notice from the Company that such Registration Statement and any post-effective
      amendments thereto have become effective as contemplated by Section
      3(c).

    

    Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(n),
      such Holder will forthwith discontinue disposition of such Registrable
      Securities under the Registration Statement until such Holder’s receipt of the
      copies of the supplemented Prospectus and/or amended Registration Statement
      contemplated by Section 3(j), or until it is advised in writing (the
“Advice”)
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement.

    

    (n) If
      (i)
      there is material non-public information regarding the Company which the
      Company’s Board of Directors (the “Board”)
      determines not to be in the Company’s best interest to disclose and which the
      Company is not otherwise required to disclose, (ii) there is a significant
      business opportunity (including, but not limited to, the acquisition or
      disposition of assets (other than in the ordinary course of business) or any
      merger, consolidation, tender offer or other similar transaction) available
      to
      the Company which the Board determines not to be in the Company’s best interest
      to disclose, or (iii) the Company is required to file a post-effective amendment
      to the Registration Statement to incorporate the Company’s quarterly and annual
      reports and audited financial statements on Forms 10-QSB and 10-KSB, then the
      Company may (x) postpone or suspend filing of a registration statement for
      a
      period not to exceed thirty (30) consecutive days or (y) postpone or suspend
      effectiveness of a registration statement for a period not to exceed twenty
      (20)
      consecutive days; provided that the Company may not postpone or suspend
      effectiveness of a registration statement under this Section 3(n) for more
      than
      forty-five (45) days in the aggregate during any three hundred sixty (360)
      day
      period; provided,
      however,
      that no
      such postponement or suspension shall be permitted for consecutive twenty (20)
      day periods arising out of the same set of facts, circumstances or
      transactions.

    

    4. Registration
      Expenses.

    

    All
      fees
      and expenses incident to the performance of or compliance with this Agreement
      by
      the Company, except as and to the extent specified in this Section 4, shall
      be
      borne by the Company whether or not the Registration Statement is filed or
      becomes effective and whether or not any Registrable Securities are sold
      pursuant to the Registration Statement. The fees and expenses referred to in
      the
      foregoing sentence shall include, without limitation, (i) all registration
      and
      filing fees (including, without limitation, fees and expenses (A) with
      respect

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    to
      filings required to be made with the OTC Bulletin Board and/or
      each other securities exchange or market on which Registrable Securities are
      required hereunder to be quoted or listed, if any (B) with respect to filing
      fees required to be paid to NASD, the NASD Regulation, Inc. and the OTC
      Compliance Unit, if any, each as applicable, and (C) in compliance with state
      securities or Blue Sky laws (including, without limitation, fees and
      disbursements of counsel for the Holders in connection with Blue Sky
      qualifications of the Registrable Securities and determination of the
      eligibility of the Registrable Securities for investment under the laws of
      such
      jurisdictions as the Holders of a majority of Registrable Securities may
      designate)), (ii) printing expenses (including, without limitation, expenses
      of
      printing certificates for Registrable Securities and of printing prospectuses
      if
      the printing of prospectuses is requested by the holders of a majority of the
      Registrable Securities included in the Registration Statement), (iii) messenger,
      telephone and delivery expenses, (iv) fees and disbursements of counsel for
      the
      Company and Special Counsel for the Holders, in the case of the Special Counsel,
      up to a maximum amount of $15,000, (v) Securities Act liability insurance,
      if
      the Company so desires such insurance, and (vi) fees and expenses of all other
      Persons retained by the Company in connection with the consummation of the
      transactions contemplated by this Agreement, including, without limitation,
      the
      Company’s independent public accountants (including the expenses of any comfort
      letters or costs associated with the delivery by independent public accountants
      of a comfort letter or comfort letters). In addition, the Company shall be
      responsible for all of its internal expenses incurred in connection with the
      consummation of the transactions contemplated by this Agreement (including,
      without limitation, all salaries and expenses of its officers and employees
      performing legal or accounting duties), the expense of any annual audit, the
      fees and expenses incurred in connection with the listing of the Registrable
      Securities on any securities exchange as required hereunder. The Company shall
      not be responsible for any discounts, commissions, transfer taxes or other
      similar fees incurred by the Holders in connection with the sales of the
      Registrable Securities.

     

    5. Indemnification.

    

    (a) Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, managers, partners, members,
      shareholders, agents, brokers, investment advisors and employees of each of
      them, each Person who controls any such Holder (within the meaning of Section
      15
      of the Securities Act or Section 20 of the Exchange Act) and the officers,
      directors, agents and employees of each such controlling Person, to the fullest
      extent permitted by applicable law, from and against any and all losses, claims,
      damages, liabilities, costs (including, without limitation, costs of preparation
      and reasonable attorneys’ fees) and expenses (collectively, “Losses”)
      , as
      incurred, arising out of or relating to any violation of securities laws by
      the
      Company or untrue or alleged untrue statement of a material fact contained
      in
      the Registration Statement, any Prospectus or any form of prospectus or in
      any
      amendment or supplement thereto or in any preliminary prospectus, or arising
      out
      of or relating to any omission or alleged omission of a material fact required
      to be stated therein or necessary to make the statements therein (in the case
      of
      any Prospectus or form of prospectus or supplement thereto, in the light of
      the
      circumstances under which they were made) not misleading, except to the
      extent,

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    but
      only
      to the extent, that such untrue statements or omissions are based solely upon
      information regarding such Holder or such other Indemnified Party furnished
      in
      writing to the Company by such Holder expressly for use therein. The Company
      shall notify the Holders promptly of the institution, threat or assertion of
      any
      Proceeding of which the Company is aware in connection with the transactions
      contemplated by this Agreement.

    

    (b) Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents and employees
      of
      such controlling Persons, to the fullest extent permitted by applicable law,
      from and against all Losses (as determined by a court of competent jurisdiction
      in a final judgment not subject to appeal or review), as incurred, arising
      solely out of or based solely upon any untrue statement of a material fact
      contained in the Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto, or arising solely out
      of
      or based solely upon any omission of a material fact required to be stated
      therein or necessary to make the statements therein (in the case of any
      Prospectus or form of prospectus or supplement thereto, in the light of the
      circumstances under which they were made) not misleading, to the extent, but
      only to the extent, that such untrue statement or omission is contained in
      any
      information so furnished in writing by such Holder or other Indemnifying Party
      to the Company specifically for inclusion in the Registration Statement or
      such
      Prospectus. Notwithstanding anything to the contrary contained herein, each
      Holder shall be liable under this Section 5(b) for only that amount as does
      not
      exceed the net proceeds to such Holder as a result of the sale of Registrable
      Securities pursuant to such Registration Statement.

    

    (c) Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party promptly shall notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party)
      in
      writing, and the Indemnifying Party shall be entitled to assume the defense
      thereof, including the employment of counsel reasonably satisfactory to the
      Indemnified Party and the payment of all fees and expenses incurred in
      connection with defense thereof (including reasonable attorneys’ fees and
      expenses); provided, that the failure of any Indemnified Party to give such
      notice shall not relieve the Indemnifying Party of its obligations or
      liabilities pursuant to this Agreement, except (and only) to the extent that
      it
      shall be finally determined by a court of competent jurisdiction (which
      determination is not subject to appeal or further review) that such failure
      shall have proximately and materially adversely prejudiced the Indemnifying
      Party.

    

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; or (2) the Indemnifying Party shall have failed promptly to assume
      the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such parties shall have been advised by counsel
      that a conflict of

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    interest
      is likely to exist if the same counsel were to represent such Indemnified Party
      and the Indemnifying Party (in which case, if such Indemnified Party notifies
      the Indemnifying Party in writing that it elects to employ separate counsel
      at
      the expense of the Indemnifying Party, the Indemnifying Party shall not have
      the
      right to assume the defense thereof and such counsel shall be at the expense
      of
      the Indemnifying Party). The Indemnifying Party shall not be liable for any
      settlement of any such Proceeding effected without its written consent, which
      consent shall not be unreasonably withheld or delayed. No Indemnifying Party
      shall, without the prior written consent of the Indemnified Party, effect any
      settlement of any pending or threatened Proceeding in respect of which any
      Indemnified Party is a party and indemnity has been sought hereunder, unless
      such settlement includes an unconditional release of such Indemnified Party
      from
      all liability on claims that are the subject matter of such
      Proceeding.

    

    All
      fees
      and expenses of the Indemnified Party (including reasonable fees and expenses
      to
      the extent incurred in connection with investigating or preparing to defend
      such
      Proceeding in a manner not inconsistent with this Section) shall be paid to
      the
      Indemnified Party, as incurred, within ten (10) Business Days of written notice
      thereof to the Indemnifying Party (regardless of whether it is ultimately
      determined that an Indemnified Party is not entitled to indemnification
      hereunder; provided,
      that the Indemnified Party shall reimburse all such fees and expenses to the
      extent it is finally judicially determined that such Indemnified Party is not
      entitled to indemnification hereunder).

    

    (d) Contribution.
      If a
      claim for indemnification under Section 5(a) or 5(b) is due but unavailable
      to
      an Indemnified Party because of a failure or refusal of a governmental authority
      to enforce such indemnification in accordance with its terms (by reason of
      public policy or otherwise), then each Indemnifying Party, in lieu of
      indemnifying such Indemnified Party, shall contribute to the amount paid or
      payable by such Indemnified Party as a result of such Losses, in such proportion
      as is appropriate to reflect the relative fault of the Indemnifying Party and
      Indemnified Party in connection with the actions, statements or omissions that
      resulted in such Losses as well as any other relevant equitable considerations.
      The relative fault of such Indemnifying Party and Indemnified Party shall be
      determined by reference to, among other things, whether any action in question,
      including any untrue or alleged untrue statement of a material fact or omission
      or alleged omission of a material fact, has been taken or made by, or relates
      to
      information supplied by, such Indemnifying, Party or Indemnified Party, and
      the parties’
      relative intent, knowledge, access to information and opportunity to correct
      or
      prevent such action, statement or omission. The amount paid or payable by a
      party as a result of any Losses shall be deemed to include, subject to the
      limitations set forth in Section 5(c), any reasonable attorneys’ or other
      reasonable fees or expenses incurred by such party in connection with any
      Proceeding to the extent such party would have been indemnified for such fees
      or
      expenses if the indemnification provided for in this Section was available
      to
      such party in accordance with its terms. In no event shall any selling Holder
      be
      required to contribute an amount under this Section 5(d) in excess of the net
      proceeds received by such Holder upon sale of such Holder’s Registrable
      Securities pursuant to the Registration Statement giving rise to such
      contribution obligation.

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph. No Person
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the Securities Act) shall be entitled to contribution from any Person who was
      not guilty of such fraudulent misrepresentation.

    

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties pursuant to the law.

    

    6. Rule
      144.

    

    As
      long
      as any Holder owns Preferred Stock, Warrants or Registrable Securities, the
      Company covenants to timely file (or obtain extensions in respect thereof and
      file within the applicable grace period) all reports required to be filed by
      the
      Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
      Act. As long as any Holder owns Preferred Stock, Warrants or Registrable
      Securities, if the Company is not required to file reports pursuant to Section
      13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the Holders
      and make publicly available in accordance with Rule 144(c) promulgated under
      the
      Securities Act annual and quarterly financial statements, together with a
      discussion and analysis of such financial statements in form and substance
      substantially similar to those that would otherwise be required to be included
      in reports required by Section 13(a) or 15(d) of the Exchange Act, as well
      as
      any other information required thereby, in the time period that such filings
      would have been required to have been made under the Exchange Act. The Company
      further covenants that it will take such further action as any Holder may
      reasonably request, all to the extent required from time to time to enable
      such
      Person to sell Conversion Shares and Warrant Shares without registration under
      the Securities Act within the limitation of the exemptions provided by Rule
      144
      promulgated under the Securities Act, including providing any legal opinions
      relating to such sale pursuant to Rule 144. Upon the request of any Holder,
      the
      Company shall deliver to such Holder a written certification of a duly
      authorized officer as to whether it has complied with such
      requirements.

    

    7. Miscellaneous.

    

    (a) Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their obligations
      under this Agreement, such Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under this Agreement.
      The Company and each Holder agree that monetary damages would not
      provide adequate
      compensation for any losses incurred by reason of a breach by it of any of
      the
      provisions of this Agreement and hereby further agrees that, in the event of
      any
      action for specific performance in respect of such breach, it shall waive the
      defense that a remedy at law would be adequate.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    (b) No
      Inconsistent Agreements.
      Neither
      the Company nor any of its subsidiaries has, as of the date hereof entered
      into
      and currently in effect, nor shall the Company or any of its subsidiaries,
      on or
      after the date of this Agreement, enter into any agreement with respect to
      its
      securities that is inconsistent with the rights granted to the Holders in this
      Agreement or otherwise conflicts with the provisions hereof. Except as disclosed
      in Schedule
      2.1(c)
      of the
      Purchase Agreement or Schedule
      II
      hereto,
      neither the Company nor any of its subsidiaries has previously entered into
      any
      agreement currently in effect granting any registration rights with respect
      to
      any of its securities to any Person. Without limiting the generality of the
      foregoing, without the written consent of the Holders of a majority of the
      then
      outstanding Registrable Securities, the Company shall not grant to any Person
      the right to request the Company to register any securities of the Company
      under
      the Securities Act unless the rights so granted are subject in all respects
      to
      the prior rights in full of the Holders set forth herein, and are not otherwise
      in conflict with the provisions of this Agreement.

    

    (c) No
      Piggyback on Registrations.
      Neither
      the Company nor any of its security holders (other than the Holders in such
      capacity pursuant hereto or as disclosed on Schedule
      II
      hereto)
      may include securities of the Company in the Registration Statement, and the
      Company shall not after the date hereof enter into any agreement providing
      such
      right to any of its securityholders, unless the right so granted is subject
      in
      all respects to the prior rights in full of the Holders set forth herein, and
      is
      not otherwise in conflict with the provisions of this Agreement.

    

    (d) Piggy-Back
      Registrations.
      If at
      any time when there is not an effective Registration Statement covering (i)
      Conversion Shares or (ii) Warrant Shares, the Company shall determine to prepare
      and file with the Commission a registration statement relating to an offering
      for its own account or the account of others under the Securities Act of any
      of
      its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
      under the Securities Act) or their then equivalents relating to equity
      securities to be issued solely in connection with any acquisition of any entity
      or business or equity securities issuable in connection with stock option or
      other employee benefit plans, the Company shall send to each Holder of
      Registrable Securities written notice of such determination and, if within
      thirty (30) days after receipt of such notice, or within such shorter period
      of
      time as may be specified by the Company in such written notice as may be
      necessary for the Company to comply with its obligations with respect to the
      timing of the filing of such registration statement, any such Holder shall
      so
      request in writing, (which request shall specify the Registrable Securities
      intended to be disposed of by the Purchasers), the Company will cause the
      registration under the Securities Act of all Registrable Securities which the
      Company has been so requested to register by the Holder, to the extent requisite
      to permit the disposition of the Registrable Securities so to be registered,
      provided that if at any time after giving written notice of its intention to
      register any securities and prior to the effective date of the registration
      statement filed in connection with such registration, the Company shall
      determine for any reason not to register or to delay registration of such
      securities, the Company may, at its election, give written notice of such
      determination to such Holder and, thereupon, (i) in the case of a determination
      not to register, shall be relieved of its obligation to register any Registrable
      Securities in connection with such registration (but not from its obligation
      to
      pay expenses in accordance with Section 4 hereof), and (ii) in the case of
      a
      determination to delay registering, shall be permitted to delay registering
      any
      Registrable Securities being registered

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    pursuant
      to this Section 7(d) for the same period as the delay in registering such other
      securities. The Company shall include in such registration statement all or
      any
      part of such Registrable Securities such Holder requests to be registered;
      provided,
      however,
      that
      the Company shall not be required to register any Registrable Securities
      pursuant to this Section 7(d) that are eligible for sale pursuant to Rule 144(k)
      of the Securities Act. In the case of an underwritten public offering, if the
      managing underwriter(s) or underwriter(s) should reasonably object to the
      inclusion of the Registrable Securities in such registration statement, then
      if
      the Company after consultation with the managing underwriter should reasonably
      determine that the inclusion of such Registrable Securities would materially
      adversely affect the offering contemplated in such registration statement,
      and
      based on such determination recommends inclusion in such registration statement
      of fewer or none of the Registrable Securities of the Holders, then (x) the
      number of Registrable Securities of the Holders included in such registration
      statement shall be reduced pro-rata among such Holders (based
      upon the number of Registrable Securities requested to be included in the
      registration), if the Company after consultation with the underwriter(s)
      recommends the inclusion of fewer Registrable Securities, or (y) none of the
      Registrable Securities of the Holders shall be included in such registration
      statement, if the Company after consultation with the underwriter(s) recommends
      the inclusion of none of such Registrable Securities; provided,
      however,
      that if
      securities are being offered for the account of other persons or entities as
      well as the Company, such reduction shall not represent a greater fraction
      of
      the number of Registrable Securities intended to be offered by the Holders
      than
      the fraction of similar reductions imposed on such other persons or entities
      (other than the Company).

    

    (e) Failure
      to File Registration Statement and Other Events.
      The
      Company and the Purchasers agree that the Holders will suffer damages if the
      Registration Statement is not filed on or prior to the Filing Date and not
      declared effective by the Commission on or prior to the Effectiveness Date
      and
      maintained in the manner contemplated herein during the Effectiveness Period
      or
      if certain other events occur. The Company and the Holders further agree that
      it
      would not be feasible to ascertain the extent of such damages with precision.
      Accordingly, if (A) the Registration Statement is not filed on or prior to
      the
      Filing Date, or (B) the Registration Statement is not declared effective by
      the
      Commission on or prior to the Effectiveness Date, or (C) the Company fails
      to
      file with the Commission a request for acceleration in accordance with Rule
      461
      promulgated under the Securities Act within three (3) Business Days of the
      date
      that the Company is notified (orally or in writing, whichever is earlier) by
      the
      Commission that a Registration Statement will not be “reviewed,” or not subject
      to further review, or (D) the Registration Statement is filed with and declared
      effective by the Commission but thereafter ceases to be effective as to all
      Registrable Securities at any time prior to the expiration of the Effectiveness
      Period, without being succeeded immediately by a subsequent Registration
      Statement filed with and declared effective by the Commission, or (E) the
      Company has breached Section 3(n) hereof, or (F) trading in the Common Stock
      shall be suspended or if the Common Stock is no longer quoted on or delisted
      from the principal exchange on which the Common Stock is then traded for any
      reason for more than three (3) Business Days in the aggregate (any such failure
      or breach being referred to as an “Event,”
and
      for purposes of clauses (A) and (B) the date on which such Event occurs, or
      for
      purposes of clause (C) the date on which such three (3) Business Day period
      is
      exceeded, or for purposes of clause (D) after more than fifteen (15) Business
      Days, or for purposes of clause (F) the date on which such three
      (3)

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    Business
      Day period is exceeded, being referred to as “Event
      Date”),
      the
      Company shall pay an amount as liquidated damages to each Holder, payable in
      cash or registered shares of Common Stock at the sole option of the Company,
      equal to one and a half percent (1.5%) of the amount of the Holder’s initial
      investment in the Preferred Stock for each calendar month or portion thereof
      thereafter from the Event Date until the applicable Event is cured; provided,
      however,
      that in
      no event shall the amount of liquidated damages payable at any time and from
      time to time to any Holder pursuant to this Section 7(e) exceed an aggregate
      of
      twelve percent (12%) of the amount of the Holder’s initial investment in the
      Preferred Stock; and provided,
      further,
      that in
      the event the Commission does not permit all of the Registrable Securities
      to be
      included in the Registration Statement solely because of its application of
      Rule
      415 after the Company has prepared and filed two (2) pre-effective amendments
      with the Commission, liquidated damages shall be waived as to the portion of
      the
      Holder’s initial investment in the Preferred Stock that corresponds to the
      number of such Holder’s Registrable Securities not permitted to be registered by
      the Commission pursuant to Rule 415, during the period that the Commission
      prevents effectiveness of such number of such Holder’s Registrable Securities.
      Notwithstanding anything to the contrary in this paragraph (e), if (a) any
      of
      the Events described in clauses (A), (B), (C), (D) or (F) shall have occurred,
      (b) on or prior to the applicable Event Date, the Company shall have exercised
      its rights under Section 3(n) hereof and (c) the postponement or suspension
      permitted pursuant to such Section 3(n) shall remain effective as of such
      applicable Event Date, then the applicable Event Date shall be deemed instead
      to
      occur on the second Business Day following the termination of such postponement
      or suspension. If the Company elects to pay liquidated damages in registered
      shares of Common Stock, the number of such shares of Common Stock to be issued
      to the Holders pursuant to this paragraph (e) shall be an amount equal to the
      quotient of (i) the liquidated damage amount, divided by (ii) the average of
      the
      VWAP for the twenty (20) trading days immediately preceding such Event Date.
      Liquidated damages payable by the Company pursuant to this Section 7(e) shall
      be
      payable on the first (1st)
      Business Day of each thirty (30) day period following the Event Date.
      Notwithstanding anything to the contrary contained herein, in no event shall
      any
      liquidated damages be payable with respect to the Warrants or the Warrant
      Shares.

    

    (f) Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and the Holders of seventy-five percent (75%) of the
      Registrable Securities outstanding. 

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    (g) 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, 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 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 (which 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

              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 below or
                as specified in writing by such Purchaser:

            
	 	 
	
              with
                copies (which shall not constitute notice) to:

            	
              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

               

            

    

    

    
      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

    

     

    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.

    

    (h) Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their successors and permitted assigns and shall inure to the benefit of each
      Holder and its successors and assigns. The Company may not assign this Agreement
      or any of its rights or obligations hereunder without the prior written consent
      of each Holder. Each Purchaser may assign its rights hereunder in the manner
      and
      to the Persons as permitted under the Purchase Agreement.

    

    (i) Assignment
      of Registration Rights.
      The
      rights of each Holder hereunder, including the right to have the Company
      register for resale Registrable Securities in accordance with the terms of
      this
      Agreement, shall be automatically assignable by each Holder to any Person of
      all
      or a portion of
      the
      Preferred Stock or the Registrable Securities of such Holder if: (i) the Holder
      agrees in writing with the transferee or assignee to assign such rights, and
      a
      copy of such agreement is furnished to the Company within a reasonable time
      after such assignment, (ii) the Company is, within a reasonable time after
      such
      transfer or assignment, furnished with written notice of (a) the name and
      address of such transferee or assignee, and (b) the securities with respect
      to
      which such registration rights are being transferred or assigned, (iii)
      following such transfer or assignment the further disposition of such securities
      by the transferee or assignees is restricted under the Securities Act and
      applicable state securities laws, (iv) at or before the time the Company
      receives the written notice contemplated by clause (ii) of this Section, the
      transferee or assignee agrees in writing with the Company to be bound by all
      of
      the provisions of this Agreement, and (v) such transfer shall have been made
      in
      accordance with the applicable requirements of the Purchase Agreement. The
      rights to assignment shall apply to the Holders (and to subsequent) successors
      and assigns. 

    

    (j) 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.

     

    (k) Governing
      Law; Jurisdiction.
      This
      Agreement shall be governed by and construed in accordance with the internal
      laws of the State of New York, without giving effect to any of the conflicts
      of
      law principles which would result in the application of the substantive law
      of
      another jurisdiction. This Agreement shall not be interpreted or construed
      with
      any presumption against the party causing this Agreement to be drafted. The
      Company and the Holders agree that venue for any dispute arising under this
      Agreement will lie exclusively in the state or federal courts located in New
      York County, New York, and the parties irrevocably waive any right to raise
      forum
      non conveniens
      or any
      other argument that New York is not the proper venue. The Company and the
      Holders irrevocably consent to personal jurisdiction in the
      state

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    and
      federal courts of the state of New York. The Company and the Holders consent
      to
      process being served in any such suit, action or proceeding by delivering a
      copy
      thereof to such party at the address in effect for notices to it under this
      Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing in this Section 7(k) shall affect
      or limit any right to serve process in any other manner permitted by law. The
      Company and the Holders hereby agree that the prevailing party in any suit,
      action or proceeding arising out of or relating to this Agreement or the
      Purchase Agreement, shall be entitled to reimbursement for reasonable legal
      fees
      from the non-prevailing party. The parties hereby waive all rights to a trial
      by
      jury.

     

    (l) Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

    

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

    

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

    

    (o) Shares
      Held by the Company and its Affiliates.
      Whenever the consent or approval of Holders of a specified percentage of
      Registrable Securities is required hereunder, Registrable Securities held by
      the
      Company or its Affiliates (other than any Holder or transferees or successors
      or
      assigns thereof if such Holder is deemed to be an Affiliate solely by reason
      of
      its holdings of such Registrable Securities) shall not be counted in determining
      whether such consent or approval was given by the Holders of such required
      percentage.

    

    (p) 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 the Purchase Agreement has been made by such
      Purchaser independently of any other Purchaser 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) or prospects of the Company or of its Subsidiaries
      which may have been 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. 

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    The
      Company acknowledges that nothing contained herein, or in any Transaction
      Document, and no action taken by any Purchaser pursuant hereto or thereto
      (including, but not limited to, the (i) inclusion of a Purchaser in the
      Registration Statement and (ii) review by, and consent to, such Registration
      Statement by a Purchaser) 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.  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.

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    

    

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

    

    BPO
      MANAGEMENT SERVICES, INC.

     

     

    By: 
      /s/ Patrick A. Dolan 
      
        

      

    

    Name: 
      Patrick A. Dolan

    Title: 
      Chairman and CEO

    

    
      
        
          [SIGNATURE
            PAGE TO REGISTRATION RIGHT AGREEMENT - COMPANY]

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    PURCHASERS:

     

    VISION
      OPPORTUNITY MASTER FUND, LTD.:

     

    By: 
      /s/  Adam Benowitz

    
      
        

      

    

    Name:
      Adam Benowitz

    Title:
      Portfolio Manager

     

     

    PURCHASER:

     

    RENAISSANCE
      CAPITAL GROWTH & INCOME FUND III,
      INC.

     

    By: 
      /s/ Russell Cleveland

    
      

    

    Name:
      Russell Cleveland

    Title:
      President

     

     

    PURCHASER:

     

    RENAISSANCE
      US GROWTH INVESTMENT TRUST
      PLC

     

    By: 
      /s/ Russell Cleveland

    
      

    

    Name:
      Russell Cleveland

    Title:
      President and Director

     

     

    PURCHASER:

     

    US
      SPECIAL OPPORTUNITIES TRUST PLC

     

    By: 
      /s/ Russell Cleveland

    
      

    

    Name:
      Russell Cleveland

    Title:
      US
      Portfolio Manager

     

     

    PURCHASER:

     

    PREMIER
      RENN US EMERGING GROWTH FUND
      LTD.

     

    By: 
      /s/ Russell Cleveland

    
      

    

    Name:
      Russell Cleveland

    Title:
      President

    

    

    
      
        
          [SIGNATURE
            PAGE TO REGISTRATION RIGHT AGREEMENT - PURCHASERS 1]

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    PURCHASER:

     

    BRIDGEPOINTE
      MASTER FUND LTD

     

    By: 
      /s/ Eric S. Swartz

    
      

    

    Name:
      Eric S. Swartz

    Title:
      Director

     

     

    PURCHASER:

     

    HELLER
      CAPITAL INVESTMENTS LLC

     

    By:  /s/
      Ronald I. Heller

    
      

    

    Name:
      Ronald I. Heller

    Title:
      CIO

     

     

    

      
        
          
            [SIGNATURE
              PAGE TO REGISTRATION RIGHT AGREEMENT - PURCHASERS 2]

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

    

     

    Schedule
      I

    

    Purchasers

    

    
      	
              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

            	 	 	 	 
	 	 	 	 	 

    

     

     

    
      
        
          
            
              SCHEDULE
                I TO REGISTRATION RIGHTS AGREEMENT

            

            
            

          

          
            
            

            
              

            

          

          
            
            

            
            

          

        

      

    

     

    
      
        	
                Legal
                  Entity Name and Address of Purchaser

              	 	
                Number
                  of Preferred Shares &

                Warrants
                  Purchased

              	 	
                Dollar
                  Amount of Investment

              
	
                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

              	 	 

      

       

    

    
      
        
          
            SCHEDULE
              I TO REGISTRATION RIGHTS AGREEMENT

          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

    

     

    Schedule
      II

    Other
      Securities to be Included on the Registration Statement

    

    50%
      of
      the Acquisition Shares

    Unterberg
      Warrants

    

    

    

    
      
        
          SCHEDULE
            II TO REGISTRATION RIGHTS AGREEMENT

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    Exhibit
      A

    Plan
      of Distribution

     

    The
      selling security holders and any of their pledgees, donees, assignees and
      successors-in-interest may, from time to time, sell any or all of their shares
      of common stock being offered under this prospectus on any stock exchange,
      market or trading facility on which shares of our common stock are traded or
      in
      private transactions. These sales may be at fixed or negotiated prices. The
      selling security holders may use any one or more of the following methods when
      disposing of shares:

     

    
      	 	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	 	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	 	
              ·

            	
              purchases
                by a broker-dealer as principal and resales by the broker-dealer
                for its
                account;

            

    

     

    
      	 	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	 	
              ·

            	
              privately
                negotiated transactions;

            

    

     

    
      	 	
              ·

            	
              broker-dealers
                may agree with the selling security holders to sell a specified number
                of
                such shares at a stipulated price per
                share;

            

    

     

    
      	 	
              ·

            	
              a
                combination of any of these methods of sale;
                and

            

    

     

    
      	 	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    The
      shares may also be sold under Rule 144 under the Securities Act of 1933, as
      amended (“Securities Act”), if available, rather than under this prospectus. The
      selling security holders have the sole and absolute discretion not to accept
      any
      purchase offer or make any sale of shares if they deem the purchase price to
      be
      unsatisfactory at any particular time.

     

    The
      selling security holders may pledge their shares to their brokers under the
      margin provisions of customer agreements. If a selling security holder defaults
      on a margin loan, the broker may, from time to time, offer and sell the pledged
      shares.

     

    Broker-dealers
      engaged by the selling security holders may arrange for other broker-dealers
      to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the selling security holders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated, which
      commissions as to a particular broker or dealer may be in excess of customary
      commissions to the extent permitted by applicable law.

     

    If
      sales
      of shares offered under this prospectus are made to broker-dealers as
      principals, we would be required to file a post-effective amendment to the
      registration statement of which

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    this
      prospectus is a part. In the post-effective amendment, we would be required
      to
      disclose the names of any participating broker-dealers and the compensation
      arrangements relating to such sales.

     

    Each
      selling security holder has agreed that so long as it beneficially owns any
      shares of Common Stock, including any shares issuable upon exercise of the
      Warrants, (x) it will not, and that it will cause its affiliates not to, in
      any
      manner whatsoever, effect, directly or indirectly, any “short sales” (as such
      term is defined in Regulation SHO of the Exchange Act) of the Common Stock
      or
      any hedging transaction, including obtaining borrow, which establishes a net
      short position with respect to the Common Stock, and (y) it shall not, and
      will
      cause its affiliates not to, permit any pledgee of such Common Stock, or such
      pledgee’s affiliates, to engage in any short sales in respect of any such
      pledged shares.

     

    The
      selling security holders and any broker-dealers or agents that are involved
      in
      selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
      sales. Commissions received by these broker-dealers or agents and any profit
      on
      the resale of the shares purchased by them may be deemed to be underwriting
      commissions or discounts under the Securities Act. Any broker-dealers or agents
      that are deemed to be underwriters may not sell shares offered under this
      prospectus unless and until we set forth the names of the underwriters and
      the
      material details of their underwriting arrangements in a supplement to this
      prospectus or, if required, in a replacement prospectus included in a
      post-effective amendment to the registration statement of which this prospectus
      is a part.

     

    The
      selling security holders and any other persons participating in the sale or
      distribution of the shares offered under this prospectus will be subject to
      applicable provisions of the Exchange Act, and the rules and regulations under
      that act, including Regulation M. These provisions may restrict activities
      of,
      and limit the timing of purchases and sales of any of the shares by, the selling
      security holders or any other person. Furthermore, under Regulation M, persons
      engaged in a distribution of securities are prohibited from simultaneously
      engaging in market making and other activities with respect to those securities
      for a specified period of time prior to the commencement of such distributions,
      subject to specified exceptions or exemptions. All of these limitations may
      affect the marketability of the shares.

     

    If
      any of
      the shares of common stock offered for sale pursuant to this prospectus are
      transferred other than pursuant to a sale under this prospectus, then subsequent
      holders could not use this prospectus until a post-effective amendment or
      prospectus supplement is filed, naming such holders. We offer no assurance
      as to
      whether any of the selling security holders will sell all or any portion of
      the
      shares offered under this prospectus.

     

    We
      have
      agreed to pay all fees and expenses we incur incident to the registration of
      the
      shares being offered under this prospectus. However, each selling security
      holder and purchaser is responsible for paying any discounts, commissions and
      similar selling expenses they incur. 

     

    We
      and
      the selling security holders have agreed to indemnify one another against
      certain losses, damages and liabilities arising in connection with this
      prospectus, including liabilities under the Securities Act.

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