bpo_8k-ex1003.htm


    Exhibit
10.3

     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 Ronald K. Herbert, an individual located at 2174 April Sound
Lane, Frisco, Texas 75034 (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
December 31, 2005 (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
      Senior Vice President of Finance, 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

          

           


        

        
           


          
            

          

        

        
           


        

      


      
        	
                3.

              	
                Position
      and Duties.

              


      

      


      
        
          	
                	
                  (a)

                	
                  During
      the Employment Period, the Employee shall serve as BPOMS Senior Vice
      President of Finance with the following duties: responsible for developing
      and maintaining overall corporate financial reporting controls and
      procedures, consolidation of financial reporting systems, financial
      analysis and support of corporate merger and acquisition activities, 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 $150,000 per year. The Base
      Salary shall be paid in approximately equal installments on a semi-monthly
      basis in accordance with the Company’s customary payroll
      practices.   All references herein to “$” 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 50% 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

          

           


        

        
           


          
            

          

        

        
           


        

      


      
        
          	
                	
                  (c)

                	
                  Signing
      Bonus.  On the Effective Date, Employee shall immediately be
      paid a one-time signing bonus in the amount of $27,500 (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 $25,000 (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 100,000 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 of 16,667 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, American Airlines Gold status and 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 $550
  .

                


        

      

      


      
        
          	
                	
                  (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

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        
          	
                	
                  (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

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        
          	
                	
                  (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

                


        

      


      
        
          
            Employment Agreement
– Page 5

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        
          	
                	
                  (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

                


        

      

      


      
        
          	
                	
                  (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.

                


        

      


      
        
          
            Employment Agreement
– Page 6

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        	
                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.

              


      

      


      
        
          	
                	
                  (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;

                


        

      


      
        
          
            Employment Agreement
– Page 7

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        
          	
                	
                  (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.

                


        

      

      


      
        
          	
                	
                  (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

          

           


        

        
           


          
            

          

        

        
           


        

      


      
        
          	
                	
                  (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.

      



      
        
          
            Employment Agreement
– Page 9

          

           


        

        
           


          
            

          

        

        
           


        

      


      10.   Restrictive
Covenants.

      


      
        
          	
                	
                  (a)

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

                


        

      

      


      
        
          	
                	
                  (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.

                


        

      

      



      
        
          
            Employment Agreement
– Page 10

          

           


        

        
           


          
            

          

        

        
           


        

      


      
        
          	
                  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.

                


        

      

      


      
        
          	
                  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

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      
        
          	
                  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

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      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/
Ronald K.
Herbert                       


      Name:Ronald
K. Herbert

      



      
        
          
            Employment Agreement
– Page 13

          

           


        

        
           


          
            

          

        

        
           


        

      


      


      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