(THE “OPTION”) AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE OPTION OR THE SHARES UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSE L, WHICH IS SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THE SHARES ISSUABLE UPON THE ERXERCISE HEREOF ARE ALSO SUBJECT TO THE FOLLOWING, AS SET FORTH IN THAT CERTAIN RIGHTS AGREEMENT DATED JULY 29, 2005, AND THAT CERTAIN REGISTRATION RIGHTS AGREEMENT DATED JULY 29, 2005 (COLLECTIVELY, THE “AGREEMENTS”) BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY: (1) A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE ACT; AND (2) SUCH OTHER RESTRICTIONS ON TRANSFER AS PROVIDED FOR IN SUCH AGREEMENTS. SUCH LOCK-UP PERIOD AND OTHER RESTRICTIONS ON TRANSFER AS PROVIDED FOR IN THE AGREEMENTS ARE BINDING ON TRANSFEREES OF SUCH SHARES.

THIS GRANT, dated as of the date of grant first stated above (the "Date of Grant"), is delivered by BPO Management Services, Inc., a Delaware corporation ("BPO" or the “Company”) to James Cortens (the "Grantee"), who is an employee or officer of BPO or one of its subsidiaries (the Grantee's employer is sometimes referred to herein as the "Employer").

WHEREAS, the Plan provides for the granting of stock options by a committee to be appointed by the Board (the "Committee) to directors, officers and key employees of BPO or any subsidiary of BPO to purchase, or to exercise certain rights with respect to, shares of the voting Common Stock of BPO, .001 par value (the "Stock"), in accordance with the terms and provisions thereof; and

Subject to the terms and conditions hereinafter set forth, BPO, with the approval and at the direction of the Committee, hereby grants to the Grantee, as of the Date of Grant, an option to purchase up to 500,000 shares of Stock at a price of Two and One Half cents ($.025) per share, the fair market value (“Option Price”). Such option is hereinafter referred to as the "Option" and the shares of stock purchasable upon exercise of the Option are hereinafter sometimes referred to as the "Option Shares." The Option is not intended by the parties hereto to be a qualified an incentive stock option as such term is defined under section 422 of the Internal Revenue Code of 1986, as amended (“Code”)).

Subject to such further limitations as are provided herein, the Option shall become exercisable in four (4) installments, the Grantee having the right hereunder to purchase from BPO the following number of Option Shares upon exercise of the Option, on and after the following dates, in cumulative fashion:

(b) Upon the occurrence of the Grantee's ceasing for any reason to be employed by the Employer (such occurrence being a "termination of the Grantee's employment"), the Option, to the extent not previously exercised, may be exercised during the following periods, but only to the extent that the Option was outstanding and exercisable on the date of termination: (i) not later than six (6) months from the date of termination of the Grantee's employment in the case of a disability (within the meaning of Section 22(e) (3) of the Code), (ii) in the case of the Grantee's death during his employment by the Employer, not later than six (6) months from the Grantee's date of death, and (iii) not later than three (3) months from the date of termination of the Grantee’s employment other than for the reasons described in (i) and (ii), above. In no event, however, shall any such period extend beyond the Option Term.

(c) In the event of the death of the Grantee, the Option may be exercised by the Grantee's estate, or by a person who acquires the right to exercise such Stock Option by bequest or inheritance or by reason of the death of the Grantee, but only to the extent that the Option would otherwise have been exercisable by the Grantee. Any such estate or other person acquiring rights under this Section shall be subject to the Grantee’s obligations under the Option and the Plan.

(e) Notwithstanding any other provisions set forth herein or in the Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing affecting BPO or any subsidiary of BPO, (ii) breach any covenant not to compete, or employment contract, with BPO or any subsidiary of BPO, or (iii) engage in conduct that would warrant the Grantee's discharge for cause (excluding general dissatisfaction with the performance of the Grantee's duties, but including any act of disloyalty or any conduct clearly tending to bring discredit upon BPO or any subsidiary of BPO), any unexercised portion of the Option shall immediately terminate and be void.

(a) The Grantee may exercise the Option with respect to all or any part of the number of Option Shares then exercisable hereunder by giving the Secretary of BPO written notice of intent to exercise. The notice of exercise shall specify the number of Option Shares as to which the Option is to be exercised and the date of exercise thereof, which date shall be at least five (5) days after the giving of such notice unless an earlier time shall have been mutually agreed upon.

(b) Full payment (in U.S. dollars) by the Grantee of the Option Price for the Option Shares purchased shall be made on or before the exercise date specified in the notice of exercise in cash, or, with the prior written consent of the Committee, in whole or in part through the surrender of previously acquired shares of Stock at their fair market value on the exercise date.

On the exercise date specified in the Grantee's notice or as soon thereafter as is practicable, BPO shall cause to be delivered to the Grantee, a certificate or certificates for the Option Shares then being purchased (out of theretofore unissued Stock or reacquired Stock, as BPO may elect) upon full payment for such Option Shares. The obligation of BPO to deliver Stock shall, however, be subject to the condition that if at any time the Committee shall determine in its discretion that the listing, registration or qualification of the Option or the Option Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the Option or the issuance or purchase of Stock thereunder, the Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee.

(c) If the Grantee fails to pay for any of the Option Shares specified in such notice or fails to accept delivery thereof, the Grantee's right to purchase such Option Shares may be terminated by BPO. The date specified in the Grantee's notice as the date of exercise shall be deemed the date of exercise of the Option, provided that payment in full for the Option Shares to be purchased upon such exercise shall have been received by such date.

(d) If during the Option Term, (i) there is the sale of eighty (80%) or more of the assets of the Company, or (ii) any one person, or more than one person acting as a group (other than the Company or existing shareholders and any revocable intervivos trusts created by any of the existing shareholders), acquires, by purchase or exchange, ownership of stock of the Company possessing more than fifty (50%) percent of the total voting power of the Company, in such event, the Option, to the extent not previously exercised, shall immediately become fully exercisable.

In the event of a reorganization, recapitalization, change of shares, stock split, spin-off, stock dividend, reclassification, subdivision or combination of shares, merger, consolidation, rights offering, or any other change in the corporate structure or shares of capital stock of BPO, the Committee shall make such adjustment as it deems appropriate in the number and kind of shares of Stock subject to the Option or in the Option Price; provided, however, that no such adjustment shall give the Grantee any additional benefits under the Option.

Pursuant to Section 4.18 of the Plan, and in accordance with the terms thereof, if at the time of Grantee’s termination of employment with the Employer the Common Stock of BPO is not publicly traded, BPO shall have the right (but not the obligation) to purchase, and the Grantee shall have the obligation to sell to BPO, the Common Stock acquired by the Grantee by the exercise of the Option.

Neither the Grantee nor any personal representative shall be, or shall have any of the rights and privileges of, a stockholder of BPO with respect to any shares of Stock purchasable or issuable upon the exercise of the Option, in whole or in part, prior to the date of exercise of the Option.

During the Grantee's lifetime, the Option hereunder shall be exercisable only by the Grantee or any guardian or legal representative of the Grantee, and the Option shall not be transferable except, in case of the death of the Grantee, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. In the event of (i) any attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise dispose of the Option, except as provided for herein, or (ii) the levy of any attachment, execution or similar process upon the rights or interest hereby conferred, BPO may terminate the Option by notice to the Grantee and it shall thereupon become null and void.

The granting of the Option or its exercise shall not be construed as granting to the Grantee any right with respect to continuance of employment by the Employer. Except as may otherwise be limited by a written agreement between the Employer and the Grantee, the right of the Employer to terminate at will the Grantee's employment with it at any time (whether by dismissal, discharge, retirement or otherwise) is specifically reserved by BPO, as the Employer or on behalf of the Employer (whichever the case may be), and acknowledged by the Grantee.

The Option may be amended by the Board or the Committee at any time (i) if the Board or the Committee determines, in its sole discretion, that amendment is necessary or advisable in the light of any addition to or change in the Internal Revenue Code of 1986, as amended, or in the regulations issued thereunder, or any federal or state securities law or other law or regulation, which change occurs after the Date of Grant and by its terms applies to the Option; or (ii) other than in the circumstances described in clause (i), with the consent of the Grantee.

Any notice to BPO provided for in this instrument shall be addressed to it in care of its Secretary at its executive offices at: c/o Cornman & Swartz, attention: Jack Cornman, 19800 MacArthur Blvd., Suite 820, Irvine, California, 92612, or such other address per written notice by the BPO, and any notice to the Grantee shall be addressed to the Grantee at the current address shown on the payroll records of the Employer. Any notice shall be deemed to be duly given if and when properly addressed and posted by registered or certified mail, postage prepaid.

The Option is granted pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and the Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this instrument, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. This Option may be amended after written notice to Grantee to the extent necessary to comply with United States Internal Revenue Code Section 409A and any regulations relating thereto as determined by BPO from time to time

The validity, construction, interpretation and effect of this instrument shall exclusively be governed by and determined in accordance with the law of the State of Delaware, except to the extent preempted by federal law, which shall to the extent govern.


	BPO Management Services, Inc.
Attest:
	By:
Secretary		President


	ACCEPTED AND AGREED TO;

Date:	By:
		Grantee