Escrow Agreement
 
by and among
 
BPO Management Services, Inc.,
 
Vision Opportunity Capital Management, LLC
 
 
and
 
 
U.S. Bank National Association
 
 
Dated as of June 11, 2007
 

--------------------------------------------------------------------------------

 
ESCROW AGREEMENT
 
THIS ESCROW AGREEMENT (this "Agreement") is dated as of the 11th day of June,
2007, by and among BPO Management Services, Inc., a Delaware corporation (the
"Company"), Vision Opportunity Capital Management, LLC, a Delaware limited
liability company ("Vision"), and U.S. Bank National Association, a national
banking association (the "Escrow Agent"), as escrow agent. Vision, the
Purchasers (as defined in the Purchase Agreement) and the Company are sometimes
referred to herein, collectively, as the "Interested Parties." Capitalized terms
used but not defined herein shall have the meanings set forth in the Purchase
Agreement (as defined below).
 
WHEREAS, the Purchasers will be purchasing from the Company shares of Series D
convertible preferred stock (the “Preferred Shares”), convertible into shares of
the Company’s common stock, par value $0.01 per share, and Series A Warrants,
Series B Warrants, Series J Warrants, Series C Warrants and Series D Warrants
(all such warrants and the Preferred Shares, the “Securities”) pursuant to a
Series D Convertible Preferred Stock Purchase Agreement dated as of June 12,
2007, by and among the Company and the Purchasers (the “Purchase Agreement”),
pursuant to which a portion of the Purchase Price has been withheld and is to be
deposited in escrow as a source of payment for the Acquisitions pursuant to
Section 3.11 of the Purchase Agreement; and
 
WHEREAS, Vision wishes to engage the Escrow Agent to act, and the Escrow Agent
is willing to act, as escrow agent hereunder and, in that capacity, to hold,
administer and distribute the amounts deposited in escrow hereunder in
accordance with, and subject to, the terms of this Agreement;
 
NOW THEREFORE, for valuable consideration, the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
 
Section 1.
Deposit of Escrow Funds.

 
On the date hereof, the Purchasers shall deposit with the Escrow Agent in
immediately available funds the amount of $14,000,000 (the "Escrow Funds," and
together with any investment income or proceeds received by the Escrow Agent
from the investment thereof from time to time pursuant to Section 3 below,
collectively, the "Escrow Property"), and the Escrow Agent agrees to hold the
Escrow Property in an account established with the Escrow Agent (the "Escrow
Account"), and to administer the Escrow Property in accordance with the terms of
this Agreement.
 
Section 2.
Release from Escrow.

 
The Escrow Property shall be released upon Closing in accordance with the
Disbursement Instructions attached hereto as Exhibit A.
 
Section 3.
Investment of Funds.

 
(a) The Escrow Agent shall invest the Escrow Property in the Escrow Agent's
Insured Money Market Account ("IMMA"). The Escrow Property and all investments
thereof shall be held and, if registrable, shall be registered in the name of
the Escrow Agent under "Escrow Agreement dated June 11, 2007 by and among BPO
Management Services, Inc., Vision Opportunity Capital Management, LLC, and U.S.
Bank National Association, as escrow agent."

-2-

--------------------------------------------------------------------------------

(b) All earnings received from the investment of the Escrow Funds shall be
credited to the Company. The Escrow Agent shall have no liability for any
investment losses, including without limitation any market loss on any
investment liquidated prior to maturity in order to make a payment required
hereunder.
 
(c) The Interested Parties agree that, for tax reporting purposes, all interest
and other income earned from the investment of the Escrow Funds in any tax year
shall be reported by the Company.
 
(d) Each of the Interested Parties agrees to provide the Escrow Agent with a
certified tax identification number by signing and returning a Form W-9 (or
Form W-8 BEN, in case of non-U.S. persons) to the Escrow Agent upon the
execution and delivery of this Agreement. The Interested Parties understand
that, in the event their tax identification numbers are not certified to the
Escrow Agent, the Internal Revenue Code, as amended from time to time, may
require withholding of a portion of any interest or other income earned on the
investment from the Escrow Funds. The Interested Parties agree to instruct the
Escrow Agent in writing with respect to the Escrow Agent's responsibility for
withholding and other taxes, assessments or other governmental charges, and to
instruct the Escrow Agent with respect to any certifications and governmental
reporting that may be required under any laws or regulations that may be
applicable in connection with its acting as Escrow Agent under this Agreement.
 
Section 4.
Intentionally Omitted.

 
Section 5.
Concerning the Escrow Agent.

 
(a) Each Interested Party acknowledges and agrees that the Escrow Agent
(i) shall not be responsible for any of the agreements referred to or described
herein (including, without limitation the Purchase Agreement), or for
determining or compelling compliance therewith, and shall not otherwise be bound
thereby, (ii) shall be obligated only for the performance of such duties as are
expressly and specifically set forth in this Agreement on its part to be
performed, each of which is ministerial (and shall not be construed to be
fiduciary) in nature, and no implied duties or obligations of any kind shall be
read into this Agreement against or on the part of the Escrow Agent, (iii) shall
not be obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with acceptable indemnification, (iv) may rely on and shall
be protected in acting or refraining from acting upon any written notice,
instruction (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), instrument,
statement, certificate, request or other document furnished to it hereunder and
believed by it in good faith to be genuine and to have been signed or presented
by the proper person, and shall have no responsibility or duty to make inquiry
as to or to determine the genuineness, accuracy or validity thereof (or any
signature appearing thereon), or of the authority of the person signing or
presenting the same, and (v) may consult counsel satisfactory to it, including
in-house counsel, and the opinion or advice of such counsel in any instance
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or advice of such counsel.
 
(b) The Escrow Agent shall not be liable to anyone for any action taken or
omitted to be taken by it hereunder except in the case of the Escrow Agent's
gross negligence or willful misconduct in breach of the terms of this Agreement.
In no event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damage or loss (including but not limited

-3-

--------------------------------------------------------------------------------

to lost profits) whatsoever, even if the Escrow Agent has been informed of the
likelihood of such loss or damage and regardless of the form of action, unless
due to the Escrow Agent's willful misconduct or fraud.
 
(c) The Escrow Agent shall have no more or less responsibility or liability on
account of any action or omission of any book-entry depository, securities
intermediary or other subescrow agent employed by the Escrow Agent than any such
book-entry depository, securities intermediary or other subescrow agent has to
the Escrow Agent, except to the extent that such action or omission of any
book-entry depository, securities intermediary or other subescrow agent was
caused by the Escrow Agent's own gross negligence or willful misconduct in
breach of this Agreement.
 
(d) The Escrow Agent is hereby authorized, in making or disposing of any
investment permitted by this Agreement, to deal with itself (in its individual
capacity) or with any one or more of its affiliates, whether it or such
affiliate is acting as a subagent of the Escrow Agent or for any third person or
dealing as principal for its own account.
 
(e) Notwithstanding any term appearing in this Agreement to the contrary, in no
instance shall the Escrow Agent be required or obligated to distribute any
Escrow Property (or take other action that may be called for hereunder to be
taken by the Escrow Agent) sooner than two (2) Business Days after (i) it has
received the applicable documents required under this Agreement in good form, or
(ii) passage of the applicable time period (or both, as applicable under the
terms of this Agreement), as the case may be.
 
Section 6.
Compensation, Expense Reimbursement and Indemnification.

 
(a) The Company agrees to pay the Escrow Agent's fees and expenses hereunder in
accordance with the fee schedule attached hereto as Schedule 1 and made a part
hereof, which may be subject to change hereafter by the Escrow Agent on an
annual basis.
 
(b) The Company agrees to reimburse the Escrow Agent on demand for all costs and
expenses incurred in connection with the administration of this Agreement or the
escrow created hereby or the performance or observance of its duties hereunder
which are in excess of its compensation for normal services hereunder, including
without limitation, payment of any legal fees and expenses incurred by the
Escrow Agent in connection with resolution of any claim by any party hereunder.
 
(c) The Company agrees to indemnify the Escrow Agent (and its directors,
officers and employees) and hold it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and expense of any
nature incurred by the Escrow Agent arising out of or in connection with this
Agreement or with the administration of its duties hereunder, including but not
limited to attorney's fees and other costs and expenses of defending or
preparing to defend against any claim of liability (collectively, "Losses"),
unless and except to the extent such Losses are caused by the Escrow Agent's
gross negligence, or willful misconduct.
 
(d) The foregoing indemnification and agreement to hold harmless shall survive
the termination of this Agreement.

-4-

--------------------------------------------------------------------------------

Section 7.
Termination.

 
This Agreement, and the escrow created hereunder, shall terminate upon the
release and/or distribution of all amounts comprising the Escrow Property, as
provided herein, and the fulfillment of all of the Escrow Agent's obligations
hereunder.
 
Section 8.
Tax Indemnification.

 
The Company agrees (i) to assume any and all obligations imposed now or
hereafter by any applicable tax law with respect to any payment or distribution
of the Escrow Property or performance of other activities under this Agreement,
(ii) to instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments or other
governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless
from any liability or obligation on account of taxes, assessments, additions for
late payment, interest, penalties, expenses and other governmental charges that
may be assessed or asserted against the Escrow Agent in connection with, on
account of or relating to the Escrow Property, the management established
hereby, any payment or distribution of or from the Escrow Property pursuant to
the terms hereof or other activities performed under the terms of this
Agreement, including without limitation any liability for the withholding or
deduction of (or the failure to withhold or deduct) the same, and any liability
for failure to obtain proper certifications or to report properly to
governmental authorities in connection with this Agreement, including costs and
expenses (including reasonable legal fees and expenses), interest and penalties.
The foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
 
Section 9.
Resignation.

 
The Escrow Agent may at any time resign as Escrow Agent hereunder by giving
thirty (30) days' prior written notice of resignation to each of the Interested
Parties. Prior to the effective date of the resignation as specified in such
notice, Vision will issue to the Escrow Agent a written instruction authorizing
redelivery of the Escrow Property to a bank or trust company that it selects as
successor to the Escrow Agent hereunder.
 
Section 10.
Dispute Resolution.

 
It is understood and agreed that, should any dispute arise with respect to the
delivery, ownership, right of possession, and/or disposition of the Escrow
Property, or should any claim be made upon the Escrow Agent or the Escrow
Property by a third party, the Escrow Agent upon receipt of notice of such
dispute or claim is authorized and shall be entitled (at its sole option and
election) to retain in its possession without liability to anyone, all or any of
the Escrow Property until such dispute shall have been settled either by the
mutual written agreement of the parties involved or by a final order, decree or
judgment of a court of competent jurisdiction in the United States of America,
the time for perfection of an appeal of such order, decree or judgment having
expired. The Escrow Agent may, but shall be under no duty whatsoever to,
institute or defend any legal proceedings which relate to the Escrow Property.

-5-

--------------------------------------------------------------------------------

 

Section 11.
Governing Law; Submission to Jurisdiction.

 
This Agreement shall be governed by and construed in accordance with the laws of
the State of California applicable to agreements made and to be performed
entirely within such state. Each party hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State of
California or the courts of the United States of America located in Los Angeles
for any actions, suits, or proceedings arising out of or relating to this
Agreement (and the parties agree not to commence any action, suit, or proceeding
relating thereto except in such courts), and further agrees that service of any
process, summons, notice, or document by U.S. registered mail to the respective
addresses set forth above shall be effective service of process for any action,
suit, or proceeding brought against the parties in any such court. Each party
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit, or proceeding arising out of this Agreement, in the
courts of the State of California or the United States of America located in Los
Angeles, and hereby further irrevocably and unconditionally waives its right and
agrees not to plead or claim in any such court that any such action, suit, or
proceeding brought in any such court has been brought in an inconvenient forum.
 
Section 12.
Waiver of Jury Trial.

 
THE ESCROW AGENT AND THE INTERESTED PARTIES HEREBY WAIVE A TRIAL BY JURY OF ANY
AND ALL ISSUES ARISING IN ANY ACTION OR PROCEEDING BETWEEN THEM OR THEIR
SUCCESSORS OR ASSIGNS, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF ITS
PROVISIONS OR ANY NEGOTIATIONS IN CONNECTION HEREWITH.
 
Section 13.
Force Majeure.

 
The Escrow Agent shall not be responsible for delays or failures in performance
resulting from acts beyond its control. Such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
 
Section 14.
Notices; Wiring Instructions.

 
(a) Notice Addresses. Any notice permitted or required hereunder shall be in
writing, and shall be sent (i) by personal delivery, overnight delivery by a
recognized courier or delivery service, or (ii) mailed by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by confirmed
telecopy accompanied by mailing of the original on the same day by first class
mail, postage prepaid, in each case the parties at their address set forth below
(or to such other address as any such party may hereafter designate by written
notice to the other parties).
 
If to Vision:
 
Vision Opportunity Capital Management, LLC
20 W. 55th Street, 5th floor
New York, NY 10019
Attn: Adam Benowitz and Antti Uusiheimala
 

-6-

--------------------------------------------------------------------------------

 
With a copy to (which copy shall not constitute notice):
 
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street
Forty-Eighth Floor
Los Angeles, CA 90071
Attn: David I. Sunkin, Esq.
Telephone: (213) 620-1780
Facsimile: (213) 443-2750

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

With a copy to (which copy shall not constitute notice):
 
Bryan Cave LLP
1900 Main Street, Suite 700
Irvine, CA 92614
Attention: Randolf W. Katz, Esq.
Tel. No.: (949) 223-7103
Fax No.: (949) 223-7100

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 Escrow Agent:
 
U.S. Bank National Association
Corporate Trust Services
633 West Fifth Street, 24th Floor
Los Angeles, CA 90071
Attention: Brad E. Scarbrough
Facsimile: (213) 615-6197
Telephone: (213) 615-6047

Notwithstanding the foregoing, notices addressed to the Escrow Agent shall be
effective only upon receipt. If any notice or document is required to be
delivered to the Escrow Agent and

-7-

--------------------------------------------------------------------------------

any other person, the Escrow Agent may assume without inquiry that each notice
or document was received by such other person when it is received by the Escrow
Agent.
 
(b) Wiring Instructions. Any funds to be paid by the Escrow Agent to the
Company, or to the Purchasers, or to be paid to the Escrow Agent hereunder,
shall be sent by wire transfer pursuant to such instruction as may have been
given in advance and in writing to or by the Company, Vision or the Escrow
Agent, as applicable.
 
Section 15.
Miscellaneous.

 
(a) Binding Effect; Successors. This Agreement shall be binding upon the
respective parties hereto and their heirs, executors, successors and assigns. If
the Escrow Agent consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business (including the escrow
contemplated by this Agreement) to, another corporation, the successor
corporation without any further act shall be the successor Escrow Agent.
 
(b) Modifications. This Agreement may not be altered or modified without the
express written consent of the parties hereto. No course of conduct shall
constitute a waiver of any of the terms and conditions of this Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the other terms of this Escrow
Agreement, or of such terms and conditions on any other occasion.
Notwithstanding any other provision hereof, consent to an alteration or
modification of this Agreement may not be signed by means of an e-mail address.
 
(c) Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, and (b) certificates and other information
previously or hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, optical disk, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
 
(d) Counterparts and Facsimile Execution. This Escrow Agreement may be executed
in several counterparts, each of which shall be deemed to be one and the same
instrument. The exchange of copies of this Agreement and of signature pages by
facsimile transmission shall constitute effective execution and delivery of this
Agreement as to the parties and may be used in lieu of the original Agreement
for all purposes. Signatures of the parties transmitted by facsimile shall be
deemed to be their original signatures for all purposes.
 
(e) Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 
 
(e) U.S.A. Patriot Act Compliance Information. Vision, the Purchasers and the
Company each shall provide to the Escrow Agent such information as the Escrow
Agent may reasonably require to permit the Escrow Agent to comply with its
obligations under the federal U.S.A. Patriot Act.  The Escrow Agent shall not
credit any amount of interest or investment

-8-

--------------------------------------------------------------------------------

 
proceeds earned on the Escrow Funds, or make any payment of all or a portion of
the Escrow Funds, to any person unless and until such person has provided to the
Escrow Agent such documents as the Escrow Agent may require to permit the Escrow
Agent to comply with its obligations under such Act.
 
[Signature Pages to Follow]
 

-9-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
11th day of June, 2007.
 
 
 
BPO Management Services, Inc.
 
 
By:  /s/ Patrick A. Dolan

--------------------------------------------------------------------------------

Name:  Patrick A. Dolan
Title:    Chairman and CEO
     
ESCROW AGENT:
     
U.S. Bank National Association, as Escrow Agent
 
 
 
By:  /s/ Brad Scarbrough

--------------------------------------------------------------------------------

Name:  Brad Scarbrough
Title:    Vice President
 

 
 
[Company and Escrow Agent Signature Page to Escrow Agreement]
 
-10-

--------------------------------------------------------------------------------

 
 
Vision Opportunity Capital Management, LLC

By:  /s/ Adam Benowitz

--------------------------------------------------------------------------------

Name:  Adam Benowitz
Title:    Managing Manager

 
 
[Purchaser Signature Page to Escrow Agreement]
 
-11-

--------------------------------------------------------------------------------

 
SCHEDULE 1
 

Initial Fees

   
Acceptance Fee (excluding charge for legal counsel and/or legal opinion)
 
The acceptance fee includes the administrative review of all documents, initial
set-up of the account, and other reasonably required services up to and
including the closing. This is a one-time fee, payable at closing.
 
U.S. Bank Corporate Trust Services reserve the right to refer any and all escrow
documents for legal review before execution. Legal fees (billed on an hourly
basis) and expenses for this service will be billed to, and paid by, the
customer. If appropriate and upon request by the customer, U.S. Bank Corporate
Trust Service will provide advance estimates of these legal fees.
$1,000.00
   
Counsel Fee
Payable at closing, this Includes fees and expenses of legal counsel as well as
the rendering of standard legal opinion, if required. Daniel P. Brown, Esq. of
Shipman & Goodwin LLP will serve as Trustee’s counsel.
At Cost
   
Escrow Agent
Annual Administration fee for performance of the routine duties of the escrow
agent associated with the management of the account. Administration Fees are
payable in advance
$3,000.00
   
Incidental Expenses
Charge for miscellaneous expenses such as fax; messenger service, overnight
mail, telephone, stationary and postage. This charge is a percent of total
Administration Fees charged in advance
0%
   

Direct Out of Pocket Expenses

Reimbursement of expenses associated with the performance of our duties,
including but not limited to publications, legal counsel after the initial
close, travel expenses and filing fees.
At Cost

 
Extraordinary Services

Extraordinary services are duties or responsibilities of an unusual nature, but
not provided for in the governing documents or otherwise set forth in this
schedule. A reasonable charge will be assessed based on the nature of the
service and the responsibility involved. At our option, these charges will be
billed at a flat fee or at our hourly rate then in effect. Examples
include:taxpayer ID number solicitationclaim distributionsexecution of
amendments/supplement agreements  

 
-12-

--------------------------------------------------------------------------------

 
EXHIBIT A
 
DISBURSEMENT INSTRUCTIONS
 
 
 
 
 

--------------------------------------------------------------------------------