Exhibit 10.2
 
 EMPLOYMENT AGREEMENT
 

This Employment Agreement (“Agreement”) is dated as of  October 15, 2008, by and
between BPO Management Services, Inc., a Delaware corporation (the “Company”),
and John M. Carradine, an individual located at 5308 Briar Tree, Dallas, Texas
75248 (the “Employee”).
 
RECITALS
 
WHEREAS, the Company, HealthAxis Inc., a Pennsylvania corporation (“HAXS”), and
Outsourcing Merger Sub, Inc., a Delaware corporation (“Merger Sub”), are parties
to that certain Agreement and Plan of Merger dated September 5, 2008 (the
“Merger Agreement”), pursuant to which it is expected that the Company and
Merger Sub will merge, the Company will become a wholly-owned subsidiary of
HAXS, HAXS will issue shares of its capital stock to the stockholders of the
Company, and HAXS will change its name to BPO Management Services, Inc. (the
surviving post-merger parent company is hereinafter referred to as “BPOMS”), all
as more particularly described in the Merger Agreement (the “Merger”);
 
WHEREAS, Employee currently serves as an executive officer of HAXS and is
employed by HAXS and Healthaxis, Ltd., a Texas limited partnership and
wholly-owned subsidiary of HAXS (“Healthaxis”) pursuant to an employment
agreement dated January 1, 2002 (together with all amendments thereto, the
“Existing Employment Agreement”);
 
WHEREAS, it is a condition to closing of the Merger Agreement that the Company
and the Employee enter into this Agreement, the terms and provisions of which
will become effective and supercede the Existing Employment Agreement in the
event of the consummation of the Merger.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants set
forth below, the parties hereby agree as follows:
 
1.
Employment. From and after the date of closing and consummation of the Merger
(the “Effective Date”), the Company hereby agrees to employ the Employee as
Managing Director of BPOMS Healthcare Division, and the Employee hereby accepts
such employment, on the terms and conditions set forth below.

As of the Effective Date, Employee resigns Employee’s position as an executive
officer of HAXS, but will continue to be employed as otherwise provided in this
Agreement.  To the extent Employee’s duties following the Effective Date include
service in an officer capacity at BPOMS, it is agreed that the Employee will not
be considered an executive officer of BPOMS unless expressly designated as such
by the BPOMS Board of Directors.

2.
Term and Renewal. The term (“Term”) of this Agreement shall begin on the
Effective Date and shall end three years from the Effective Date or upon
termination of the Employee’s employment by the Company or by the Employee in
accordance with the terms of this Agreement.

Employment Agreement – Page 1
 
 

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3.
Position and Duties.

(a)
During the Employment Period, the Employee shall serve as Managing Director of
BPOMS Healthcare Division with the following duties: senior executive in charge
of the BPOMS Healthcare Division (which shall consist of the Healthaxis legacy
business lines including claims administration systems and services, front end
BPO services for healthcare customers, and NextProcess accounts payable BPO
services), and such other related duties as requested by the Board of Directors,
President or Chief Executive Officer of the Company. The Employee shall report
directly to the Chief Executive Officer and President of the Company. Unless
otherwise authorized by the Chief Executive Officer or President of the Company,
the Employee shall devote substantially all of his working time, attention and
energies during normal business hours (other than absences due to illness or
vacation) to the performance of his duties for the Company and its affiliates
and subsidiaries (hereafter referred to as “affiliates”). Notwithstanding the
above, the Employee shall be permitted, to (i) serve on civic or charitable
boards or committees, and (ii) serve on boards of other companies provided that
such activities do not interfere with the Employee’s performance of his duties
for the Company and its affiliates.  The Employee shall be entitled to receive
and retain all remuneration received by him from the items listed in clauses (i)
through (ii) of this paragraph.

(b)
In order to induce the Company to enter into this Agreement, Employee represents
and warrants to the Company that (i) Employee is not a party or subject to any
employment agreement or arrangement with any other person, firm, company,
corporation or other business entity other than the Existing Employment
Agreement; and (ii) Employee is subject to no restraint, limitation or
restriction by virtue of any agreement or arrangement, or by virtue of any law
or otherwise which would impair Employee’s right or ability to enter the employ
of the Company or to perform fully his duties and obligations pursuant to this
Agreement.

 
4.
Place of Performance. During the Employment Period, the initial location of
employment of the Employee shall be in Irving, Texas.  The Employee’s location
of employment shall not be changed by a distance greater than seventy five (75)
miles without the Employee’s prior written consent.

5.
Compensation and Related Matters.

(a)
Base Salary. During the Employment Period, the Company shall pay the Employee a
base salary (the “Base Salary”) at the rate of $175,000 per year. The Base
Salary shall be paid in approximately equal installments on a semi-monthly basis
in accordance with the Company’s customary payroll practices.   All references
herein to “$” or “dollars” shall mean US dollars.  The Base Salary is subject to
review and increase on at least an annual basis, but in no event may the Base
Salary be reduced below the rate stated in this Setion 5(a).

(b)
Annual Bonus. Commencing on January 1, 2009, for each 12 month calendar year
during the Term, the Employee shall be eligible to earn an annual cash bonus
(the “Annual Bonus”) in an such amount equal to 100% of the then current Base
Salary as shall be determined by the Board of Directors of BPOMS (the “Board”)
based on the achievement of Company, BPOMS, and other affiliate goals and
individual performance goals for the Employee as established by the Board for
each applicable calendar year, and except that no Annual Bonus (or any pro-rated
amount thereof for any Partial Year) shall be accrued, due or payable or deemed
earned by Employee if, prior to the end of a calendar year, Employee voluntarily
terminates his employment with the Company or if the Company terminates
Employee’s employment for Cause as defined in this Agreement.  The Board shall
establish objective and subjective criteria to be used to determine the extent
to which performance goals have been satisfied.  The Annual Bonus shall be
prorated for any applicable partial calendar year (each a “Partial
Year”).  Employee shall be entitled to participate in other Company and BPOMS
bonus/incentive plans that may be adopted from time to time at a level and in a
manner consistent with other senior level employees.

Employment Agreement – Page 2
 
 

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(c)
Signing Bonus.  On the Effective Date, Employee shall immediately be paid a
one-time signing bonus in the amount of $75,000 (subject to normal withholding)
(the “Signing Bonus”). The Signing Bonus is in addition to, and shall not be
offset from, the Annual Bonus.  If the Employee voluntarily terminates his
employment with the Company within the first nine (9) months following the
Effective Date without Good Cause (as hereinafter defined), Employee shall
refund to the Company a pro rata portion (1/9th of the net amount for each
remaining month of the 9 month period) of the net amount received by Employee
(after all withholding) from the Signing Bonus.

(d)
Transition Bonus.  On the date that 80% of the transition objectives specified
on Exhibit A attached hereto are achieved, Employee shall immediately be paid a
one-time transition bonus in the amout of $50,000 (subject to normal
withholding) (the “Transition Bonus”). The Transition Bonus is in addition to,
and shall not be offset from, the Annual Bonus and is not refundable to the
Company under any circumstances.

 
(e)
Equity Compensation.  On the Effective Date Employee shall receive an award of
250,000 shares of restricted stock to be issued under the Healthaxis Inc. 2005
Stock Incentive Plan (or any successor plan with substantially similar terms,
the “Plan”).  The restricted stock shall vest over the first three (3) years
from the Effective Date in six (6) increments of41,667 shares on each six (6)
month anniversary of the Effective Date, and shall also be fully vested on a
Change in Control (as defined in the Plan) in any transaction occurring
following the Merger.  Following the Effective Date, Employee shall be entitled
to additional equity awards in amounts and on terms consistent with periodic
awards to other senior management personnel. The numbers of shares stated above
are subject to adjustment for any reverse stock split affected in connection
with the Merger.

(f)
Business, Travel and Entertainment Expenses. The Company shall promptly
reimburse the Employee for all business, travel and entertainment expenses
incurred during the Employment Period with respect to the business or
prospective business of the Company, including American Airlines Admirals Club
membership, Platinum Status on American Airlines, Platinum Amex feesand airline
upgrades, as well as professional and license fees (including CPA fees,
continuing education costs, etc.as applicable) consistent with past practices,
all subject to the Company’s expense reimbursement policies.

(g)
Car Allowance.  A monthly car allowance of $650 .

(h)
Vacation & PTO. During the Employment Period, the Employee shall be entitled to
four (4) weeks of paid vacation per year. Vacation not taken during the
applicable fiscal year shall be carried over to the next following fiscal year
provided that no vacation shall accrue during the time period that Employee has
accrued and unused vacation in excess of eight (8) weeks.  In addition, Employee
shall be entitled to seven (7) days of paid time off each year consistent with
past Healthaxis practices or as otherwise provided under the BPOMS standard PTO
policy in effect at a given time.  All current Healthaxis vacation and PTO
balances as of the Effective Date will be carried forward and are not forfeited
as a result of the Merger.

Employment Agreement – Page 3
 
 

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(i)
Health, 401(k) and Incentive Benefit Plans. During the Employment Period, the
Employee (and his eligible spouse and dependents) shall be entitled to
participate in all health benefit plans and programs maintained by the Company
from time to time for the benefit of its employees, including, without
limitation, all medical, hospitalization, dental, disability, accidental death
and dismemberment, travel accident and life insurance plans, programs and
arrangements. These benefits shall not be reduced in any material way from the
levels currently provided by Healthaxis on the Effective Date. In addition,
during the Employment Period, the Employee shall be eligible to participate in
all 401 (k), pension, retirement, savings and other employee benefit plans and
programs maintained from time to time by the Company for the benefit if its
employees. These benefits shall not be reduced in any material way from the
levels currently provided by Healthaxis on the Effective Date.  All prior
service at Healthaxis shall be bridged with respect to any vesting, eligibility
or similar requirements under all Company benefit plans and Employee will
receive full credit for all periods of service at Healthaxis.

(j)
Additional Items.  The Company shall provide the Employee with the following
additional items in connection with the performance of his duties: laptop
computer and  mobile telephone.

 
6.
Termination. The Employee’s employment hereunder may be terminated during the
Employment Period under the following circumstances:

(a)
Death. The Employee’s employment hereunder shall terminate upon his death.

(b)
Disability. If, as a result of the Employee’s incapacity due to physical or
mental illness, the Employee qualifies for and is certified as eligible for
long-term disability benefits by the carrier under the then current long-term
disability plan as required herein to be maintained by the Company (or any
affiliate for the benefit of Company employees), then the Company shall have the
right to terminate the Employee’s employment hereunder for “Disability.”

(c)
Cause. The Company shall have the right to terminate the Employee’s employment
for “Cause.” For purposes of this Agreement, the Company shall have “Cause” to
terminate the Employee’s employment only upon the Employee’s:

(i)
willful gross misconduct or conviction of an indictable offense or a felony
after the Effective Date that, in either case, results in material and
demonstrable damage to the business or reputation of the Company or any of its
affiliates or which involves any crime or offense involving money or other
property of the Company or any of its affiliates; or

(ii)
refusal to perform, or willful breach or neglect of the performance of any of
his duties or obligations hereunder and continued failure to perform his duties
hereunder  within five business days after the Company delivers to him a written
demand for performance that specifically identifies the actions to be performed;
or

Employment Agreement – Page 4
 
 

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(iii)
breach of this Agreement by Employee; or

 
(iv)
any attempt by Employee to improperly secure any personal profit in connection
with the business of the Company or any of its affiliates; or

(v)
chronic alcoholism or drug addiction.

 
Cause shall not exist unless and until the Company has delivered to the Employee
written notice from the President or the Chief Executive Officer of the Company
specifying the particulars thereof in detail and unless and until the Company
has given the Employee ten  (10) days in which to cure the underlying breach, to
the extent such breach is susceptible of cure.

(d)
Without Cause. The Company shall have the right to terminate the Employee’s
employment hereunder without Cause by providing the Employee with a Notice of
Termination.

(e)
Change of Control. The Company may elect to terminate the Employee’s employment
hereunder upon a Change of Control Event. A Change of Control Event means any of
the following: (1) the acquisition of BPOMS or the Company by another entity or
persons by means of any transaction or series of related transactions
(including, without limitation, any stock acquisition, reorganization, merger or
consolidation) other than a transaction or series of transactions in which the
holders of the voting securities of BPOMS or the Company outstanding immediately
prior to such transaction continue to retain (either by such voting securities
remaining outstanding or by such voting securities being converted into voting
securities of the surviving entity), at least fifty percent (50%) of the total
voting power represented by the voting securities of BPOMS or the Company or
such surviving entity outstanding immediately after such transaction or series
of transactions, or (2) the sale of 80% or more of the assets of BPOMS or the
Company or the operating division of BPOMS to which Employee’s primary duties
relate.

(f)
Good Reason.  The Employee shall have the right to terminate  his employment for
“Good Reason.”  For purposes of this Agreement, the Employee shall have “Good
Reason” to terminate his employment upon (each a “Good Reason Event”):

(i)
a reduction in the Employee’s then current Base Salary and such reduction is not
rescinded within 15 days after written notice from Employee that such reduction
in Base Salary constitutes grounds for termination for a Good Reason Event; or

(ii)
the failure of Company to pay any compensation, or otherwise provide any
benefits, due to the Employee in accordance with the terms of this Agreement and
such failure is not cured within 30 days after written notice from Employee
identifying such failure to make such payment or benefit and stating that such
failure constitutes grounds for termination for a Good Reason Event; or

 (iii)
a material diminution of Employee’s responsibilities, or the assignment to the
Employee of duties materially inconsistent with the Employee’s position, duties,
and status with the Company as set forth in Section 3(a), if done without the
Employee’s prior written consent and provided such change is not rescinded by
the Company within 30 days after written notice from Employee specifying the
changes described in this subparagraph and a statement that such changes
constitute grounds for termination for a Good Reason Event; or

Employment Agreement – Page 5
 
 

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(iv)
the Company moves the Employee’s principal place of employment by a distance
greater than seventy five (75) miles from the City of Irving, Texas, without the
Employee’s prior written consent and such action to move Employee is not
rescinded within 30 days after written notice from Employee stating that such
change of location constitutes grounds for termination for a Good Reason Event;
or

(v)
The Company otherwise breaches this Agreement and such breach is not cured
within 10 days after written notice from Employee identifying such breach and
stating that such breach constitutes grounds for termination for a Good Reason
Event.

The Employee’s continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting a Good Reason
Event hereunder; however, a claim that a Good Reason Event has occurred shall be
deemed waived, even if such Good Reason Event has occurred, if not asserted in
writing by the Employee to the Company within 30 days of Employee’s actual
knowledge of the occurrence of such Good Reason Event.

7.
Termination Procedure.

(a)
Notice of Termination. Any termination of the Employee’s employment by the
Company or by the Employee during the Employment Period (other than pursuant to
Section 6(a)) shall be communicated by written Notice of Termination to the
other party. For purposes of this Agreement, a “Notice of Termination” shall
mean a notice indicating the specific termination provision in this Agreement
relied upon and setting forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee’s employment under
that provision.

(b)
Date of Termination. “Date of Termination” shall mean:

(i)
if the Employee’s employment is terminated by his death, the date of his death,

(ii)
if the Employee’s employment is terminated pursuant to Section 6(b), thirty (30)
days after the date on which the Notice of Termination was transmitted to the
Employee (provided that the Employee does not return to the substantial
performance of his duties on a full-time basis during such thirty (30) day
period), and

(iii)
if the Employee’s employment is terminated for any other reason, the date on
which a Notice of Termination is given or any later date (within thirty (30)
days after the giving of such notice) set forth in such Notice of Termination.

8.
Compensation upon Termination or During Disability. In the event the Employee is
terminated for Disability or his employment terminates during the Employment
Period, the Company shall provide the Employee with the payments and benefits
set forth below. The Employee acknowledges and agrees that the payments set
forth in this Section 8 (other than the Accrued Obligations as hereinafter
defined) constitute liquidated damages for termination of his employment during
the Employment Period.

Employment Agreement – Page 6
 
 

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(a)
Termination by Company Without Cause or Due to a Change of Control Event or by
the Employee for Good Reason. If the Employee’s employment is terminated by the
Company without Cause (other than Disability) or the Company elects to terminate
Employee’s employment due to a Change of Control Event or the Employee elects to
terminate his Employment for a Good Reason Event:

(i)
the Company shall pay to the Employee, on or before the Date of Termination, a
payment equal to all accrued and unpaid Base Salary and accrued unpaid vacation
pay through the Date of Termination and the Company shall have no obligation to
pay Base Salary or any other compensation for the remainder of the Employment
Period;

 
(ii)
the Company shall, consistent with past practice, reimburse the Employee
pursuant to Section 5(f) for business expenses incurred but not paid prior to
such termination of employment;

 
(iii)
the Company shall pay to the Employee severance pay in an amount equal to the
sum of (x) an amount equal to one (1) full year of his then current Base Salary;
plus (y) a portion of the Annual Bonus amount prorated from January 1 of the
year in which the termination occurs through the Date of Termination.  The
determination of the prorated Annual Bonus amount shall be based on a negotiated
amount to be mutually agreed upon in good faith between Employee and BPOMS as
the likely Annual Bonus amount that would have been earned for the full year
considering progress made as of the Termination Date toward achievement of the
Company, BPOMS, and other affiliate goals and individual performance goals for
the Employee as established by the Board for the current calendar year;

(iv)
all outstanding unvested equity awards, including unvested restricted stock and
unvested stock options, shall be automatically 100% vested on the Termination
Date. In addition, Employee shall have three (3) years from the Termination Date
to elect to exercise all of his outstanding stock options or similar awards,
including all such awards vested prior to the Termination Date, and all such
awards that become vested on the Termination Date;

(v)
Employee’s (and Employee’s spouse/dependents) then current health, dental and
life insurance benefits shall be continued at the Company’s expense for a period
of up to one (1) year.  In the event these plans may not be continued by the
terms of the plan, then the Company will reimburse Employee for these expenses
during the period for electing COBRA or purchasing an individual plan that is
similar to the Company plan.  These benefits may be terminated earlier in the
event Employee becomes eligible for coverage under a subsequent employer’s plan;

(vi)
at Employee’s request, the Company will provide employee with up to $2,000 per
month for a maximum of nine (9) months to cover the actual cost of
outplacement/search firm services from a firm selected by Employee.

Employment Agreement – Page 7
 
 

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(vii)
the Employee shall be entitled to any other rights, compensation and/or benefits
as may be due to the Employee in accordance with the terms and provisions of any
written agreements, plans or programs of the Company.

The payments and benefits provided for as subclause 8(a)(i) and subclause
8(a)(ii) above  are hereinafter referred to as the “Accrued Obligations.”
 
(b)
Termination by the Company for Cause or Termination by Employee Without Good
Reason. If the Employee’s employment is terminated by the Company for Cause or
by the Employee without Good Reason, then the Company shall provide the Employee
with his Accrued Obligations and shall have no further obligation to the
Employee hereunder except for the benefits provided under any stock option
grants and any other agreements, plans or programs of the Company and,
notwithstanding any provision in this Agreement to the contrary, no Annual Bonus
shall be due or payable or deemed earned or accrued. If the Employee’s
employment is terminated by the Company for Cause or by the Employee without
Good Reason, all outstanding unvested equity awards, including unvested
restricted stock and unvested stock options, shall be forfeited if and as
applicable under the specific award.  Employee shall have three (3) years from
the Termination Date to elect to exercise all of his outstanding fully vested
stock options or similar awards which have grant dates prior to the Effective
Date.  For all fully vested stock options or similar awards with grant dates on
or after the Effective Date, employee shall have the post-termination exercise
rights as contained in the specific award.

(c)
Disability. During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
(“Disability Period”), the Employee shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event the Employee’s employment is terminated for
Disability pursuant to Section 6(b), the Company shall pay the Accrued
Obligations and Annual Bonus prorated through the Date of Termination and shall
have no further obligations to the Employee hereunder except to the extent of
disability benefits or other employee benefit plans and stock option grants
otherwise available to Employee and except for Accrued Obligations and prorated
Annual Bonus as expressly provided for herein. If the Employee’s employment is
terminated for Disability pursuant to Section 6(b), all outstanding unvested
equity awards, including unvested restricted stock and unvested stock options,
shall be automatically 100% vested on the Termination Date. In addition,
Employee shall have three (3) years from the Termination Date to elect to
exercise all of his outstanding stock options or similar awards, including all
such awards vested prior to the Termination Date, and all such awards that
become vested on the Termination Date.

(d)
Death. If the Employee’s employment is terminated by his death, the Company
shall pay the Accrued Obligations and Annual Bonus prorated through the Date of
Termination and shall have no further obligations hereunder except for any
benefits otherwise available to Employee or his family under insurance, stock
option grants or other employee benefit plans.  If the Employee’s employment is
terminated by his dealth, all outstanding unvested equity awards, including
unvested restricted stock and unvested stock options, shall be automatically
100% vested on the Termination Date. In addition, Employee’s executor or
successor in interest to these rights shall have three (3) years from the
Termination Date to elect to exercise all of his outstanding stock options or
similar awards, including all such awards vested prior to the Termination Date,
and all such awards that become vested on the Termination Date.

Employment Agreement – Page 8
 
 

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(e)
Full and Final Settlement.  The Employee acknowledges and agrees that the
payments and agreements described in this Section 8 (other than the Accrued
Obligations) shall be in full and final satisfaction of all claims which the
Employee may have against the Company and all of its affiliates arising from the
termination of the Employee’s employment pursuant to any statutes or common
law  Upon compliance by the Company with this Section 8, the Employee shall not
be entitled to pursue any legal action of any kind for any additional payment or
notice required to be given.

9.
Confidential Information.

 
(a)
Confidential Information. Except as may be required or appropriate in connection
with his carrying out his duties under this Agreement, the Employee shall not,
without the prior written consent of the Company or as may otherwise be required
by law or any legal process, or as is necessary in connection with any
adversarial proceeding against the Company or any of its affiliates (in which
case the Employee shall cooperate with the Company in obtaining a protective
order at the Company’s expense against disclosure by a court of competent
jurisdiction), communicate, to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform his duties hereunder or to the Employee’s legal and
financial advisors, any trade secrets, confidential information, knowledge or
data relating to the Company, BPOMS, or any of their respective  affiliates or
any businesses or investments of the Company or any affiliates, obtained by the
Employee during the Employee’s employment by the Company that is not generally
available public knowledge (other than by acts by the Employee in violation of
this Agreement).  For purposes of this Agreement, “confidential information”
shall not include:  information which is or becomes generally available to the
public other than as a result of a disclosure by the Employee in violation of
this Agreement or any other agreement.  Any unintentional disclosures or any
disclosures made by Employee in good faith in furtherance of the business as
provided above shall not be grounds for termination for Cause unless such
disclosure was due to willful gross misconduct as contemplated under Section
6(c).

(b)
Injunctive Relief. In the event of a breach or threatened breach of this Section
9, the Employee agrees that the Company and its affiliates shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, the Employee acknowledges that damages would be
inadequate and insufficient.

 
Notwithstanding the foregoing, to the extent of any conflict between the
provisions of this Section 9 and the provisions of a mutually acceptable
Employee Proprietary Information and Inventions Agreement to be entered into
between the Company and the Employee, the terms of the latter agreement shall
govern.

10. 
 Restrictive Covenants.

 
(a)
Non-Competition.  During his employment with the Company (“Employment”), the
Employee agrees not to:

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(i) 
Undertake any planning for any outside business activity that is competitive
with the Company or its affiliates; or

(ii)
Directly or indirectly own any interest in, manage, control, participate in
(whether as an officer, director, employee, partner, agent, representative or
otherwise), consult with, render services  for, or in any manner engage in any
business directly competing with the Company or its affiliates and engaged in
such business anywhere within any state, possession, territory or jurisdiction
of the United States of America.

 
The ownership of any of the following securities by Employee shall be deemed not
to violate this Section 10(a):  if Employee owns beneficially or of record in
the aggregate less than five percent (5%) of any security which is publicly
traded on a national securities exchange or actively traded in a recognized
over-the-counter market.

(b)
Non-Solicitation.  During the period commencing on the Effective Date of this
Agreement and continuing until the first (1st) anniversary of the date when the
Employee's Employment is terminated for any reason the Employee shall not
directly or indirectly, personally or through others, solicit or attempt to
solicit (on the Employee's own behalf or on behalf of any other person or
entity) either (i) the employment of any employee of the Company or any of the
Company's affiliates or (ii) the business of any customer of the Company or any
of the Company's affiliates with whom the Employee had contact during his
Employment.

(c)
Non-Disclosure.  The Employee shall have entered into a mutually acceptable form
of Employee Proprietary Information and Inventions Agreement with the Company.

(d)
Injunctive Relief. The Employee acknowledges and agrees that his failure to
perform any of his covenants in this Section 10 would cause irreparable injury
to the Company and cause damages to the Company that would be difficult or
impossible to ascertain or quantify. Accordingly, without limiting any other
remedies that may be available with respect to any breach of this Agreement, the
Employee agrees that the Company may seek an injunction to restrain any breach
of this Section 10.

(e)
Survival.  The covenants in this Section 10 shall survive any termination or
expiration of this Agreement and the termination of the Employee's Employment
with the Company for any reason.

11.
Successors; Binding Agreement.  No rights or obligations of the Employee under
this Agreement may be assigned or transferred by the Employee other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon the Employee’s death, this
Agreement and all rights of the Employee hereunder shall inure to the benefit of
and be enforceable by the Employee’s beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to the
Employee’s interests under this Agreement. If the Employee should die following
his Date of Termination while any amounts would still be payable to him
hereunder if he had continued to live, all such amounts unless otherwise
provided herein shall be paid in accordance with the terms of this Agreement to
such person or persons so appointed in writing by the Employee, or otherwise to
his legal representatives or estate.  The Company shall be permitted to assign
this Agreement and its rights, together with its obligations, hereunder, in
connection with any sale, transfer or other disposition of all or substantially
all of the assets acquired in the acquisition, whether by merger, consolidation,
reorganization, or otherwise, provided the assignee agrees to accept such
assignment and assumes all obligations of the Company herein.  Subject to the
preceding provisions of this section 11, the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and assigns.

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12.
Notice. For the purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered either personally or two (2)
business days after sending by certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:

If to the Employee: At his residence address most recently filed with the
Company.

 
If to the Company:

BPO Management Services, Inc.
1290 N. Hancock, Suite 202
Anaheim, CA 92807
Attention: Chief Executive Officer
Tel.: (714) 974-2670
Fax :  (714) 974-4771
 
with a copy to:

Jack T. Cornman, Esq.
Cornman & Swartz
19800 MacArthur Blvd., Suite 820
Irvine, CA 92612
Tel : 949 224 1500
Fax: 949 224 1505
Email: jcornman@cornmanswartz.com

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
 
13.
Miscellaneous. No provisions of this Agreement may be amended, modified, or
waived unless such amendment or modification is agreed to in writing signed by
the Employee and by a duly authorized officer of the Company, and such waiver is
set forth in writing and signed by the party to be charged. No waiver by either
party hereto at any time of any breach by the other party hereto of any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.  The respective rights and obligations of the parties hereunder of
this Agreement shall survive the Employee’s termination of employment and the
termination of this Agreement to the extent necessary for the intended
preservation of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Texas without regard to its conflicts of law principles.  Each
party hereto hereby submits itself to the jurisdiction of the courts located in
the State of California and in Orange County, in respect of all actions arising
out of or in connection with the interpretation or enforcement of this
Agreement, waives any argument that venue in such forums is not convenient and
agrees that any actions initiated by such party shall be venued in such
forums.  For purposes of this Agreement, all references in this Agreement to the
“Company” shall mean the Company, BPOMS, Healthaxis, Ltd. or other entity within
the BPOMS  consolidated group of companies that constitutes the employer of
record from time to time, it being understood and agreed that benefits and
compensation hereunder may be paid and provided by different entities within the
consolidated company from time to time.

Employment Agreement – Page 11
 
 

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14.
Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

15.
Counterparts. This Agreement may be executed in one or more counterparts and by
facsimile, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

16.
Entire Agreement; Conditional Effectiveness. This Agreement together with all
exhibits thereto, any grants of stock options previously or concurrently given
to Employee by the Company and the Employee Proprietary Information And
Inventions Agreement to be entered into set forth the entire agreement of the
parties hereto in respect of the subject matter contained herein.  This
effectiveness of this Agreement is expressly conditioned on closing of the
Merger.  Upon closing of the Merger, this Agreement shall supersede and replace
the Existing Employment Agreement and all other prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto
in respect of the subject matter hereto. Unless and until the Merger is closed
and consummated, the terms of the Existing Employment Agreement shall remain in
full force and effect in accordance with its terms, and Employee’s current
employment, benefits and compensation shall continue to be governed thereby.

17.
Withholding. All payments hereunder shall be subject to any required withholding
of Federal, national, provincial and local taxes pursuant to any applicable law
or regulation.

18.
Section Headings. The section headings in this Employment Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.

19.
Attorneys’ Fees.  Should any arbitration, proceeding, or other legal action be
brought for the enforcement of this Agreement, the successful or prevailing
party shall be entitled to recover its reasonable attorneys’, accounting, and
other professional fees, and any other costs incurred in such arbitration,
proceeding or other legal action, at trial, on appeal, or in collection thereof,
in addition to any other relief to which it may be entitled.

Employment Agreement – Page 12
 
 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
on the date first above written.
 
Company:
 
BPO Management Services, Inc.
 
 
 By: /s/ Patrick Dolan                   
 Name: Patrick Dolan
 Title: Chief Executive Officer
 

Employee:

/s/ John M. Carradine                    
Name:John M. Carradine
 
 
 
 
 
 
 
 
 

 

Employment Agreement – Page 13
 
 

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Exhibit A
 Transition Bonus Milestones/Requirements
 
Upon substantial achievement of 80% of the following transition milestones by
the Healthaxis senior management team, the Transition Bonus shall be due.  The
target payment date is on or before 6 months from the Effective Date.
 
 
·
Successfully move data center from Virginia to Blue Hill with no loss of support
to customers.

 
 
·
Integrate Healthaxis’ Web Self-Service product development with BPOMS technology
team to demonstrate methodology for using offshore resources.

 
 
·
Eliminate Healthaxis corporate cost for

 
o
Audit

 
o
External Legal Support

 
o
Directors & Officers Insurance

 
o
Other Public Company Costs

 
 
·
Integrate BPOMS OCR technology for A/P processing into Healthaxis operations to
improve functionality.

 
 
·
Develop an integration plan for Human Resources/Benefits.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment Agreement – Page 14