Employment Agreement


     

    Exhibit
      10.1

    
 

    BPO
      MANAGEMENT SERVICES, INC.

     

    1290
      N. HANCOCK, SUITE 202, ANAHEIM, CALIFORNIA 92807

    


     

    January
      26, 2007

    


    Donald
      W.
      Rutherford

    21775
      Tahoe Lane, 

    Lake
      Forest CA 92630


     

    Dear
      Don:

     

    Please
      allow this letter to serve as the entire agreement between BPO Management
      Services, Inc. (the "Company") and you, Donald Rutherford (the "Employee")
      with
      respect to certain aspects of your employment with the Company. The Company
      acknowledges and agrees that the Employee is and will remain a partner of,
      and
      has and will retain an interest in, Tatum, LLC ("Tatum"), which will benefit
      the
      Company in that the Employee will have access to certain Tatum
      resources.

     

    Beginning
      Date

     

    The
      Employee will work for the Company beginning on January 29, 2007.

     

    Compensation

     

    Salary:
      $104,167.00 annually ("Salary"), for which Employee will provide at least 50%
      of
      his available time; provided however, that on June 1, 2007, or sooner if
      required by the Company, the annual Salary shall increase to $166, 667 and
      Employee shall devote his full time services to the Company. Employee's Salary
      may be increased from time to time by the Company in its
      discretion.

     

    Annual
      Cash Bonus:
      to be
      determined within first 30 days of employment. Employee acknowledges that the
      Company entered into an agreement (the “Tatum Agreement”) with Tatum, whereby
      Tatum is to provide certain resources to the Company. Employee agrees that
      the
      Company will tender directly to Tatum 20% of any cash bonuses otherwise payable
      to Mr. Rutherford during the term of the Tatum Agreement.

     

    Employee
      agrees that 20% of such cash bonus shall be paid directly to Tatum, LLC as
      a fee
      in connection with a Resources Agreement entered into between the Company and
      Tatum, LLC (the “Resources Agreement”)

     

    Equity:
      Option
      grant on start date to purchase 400,000 shares of common stock at $1.50 per
      share vesting half-yearly equally over a four-year period, and otherwise subject
      to the terms of the Company’s 2003 Stock Option Plan.

     

    Other
      Compensation Provisions: 

     

    During
      the course of the Employee's engagement hereunder, the Employee will remain
      a
      partner of Tatum. As a partner of Tatum, Employee will
      share with Tatum a portion of his or her economic interest in any stock options
      or equity bonus that the Company may grant the Employee and may also share
      with
      Tatum a portion of any cash bonus and severance the Company may pay the
      Employee, to the extent specified in that certain Part-Time Engagement Resources
      Agreement between the Company and Tatum (the "Resources Agreement"). The Company
      acknowledges and consents to such arrangement.

     

    
      
         

      

      
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    Benefits

     

    The
      Employee will be eligible for any Company employment retirement and/or 401(k)
      plan and for vacation and holidays consistent with the Company's policy as
      it
      applies to senior management, and the Employee will be exempt from any delay
      periods required for eligibility. 

     

    In
      lieu
      of the Employee participating in the Company-sponsored employee medical
      insurance benefit, the Employee will remain on his or her current medical plan.
      The Company will reimburse the Employee for amounts paid by the Employee for
      such medical insurance for him and (where applicable) his/her family of up
      to
      such amount per month that the Company would have incurred to provide such
      insurance to other executives. To the extent permitted under applicable U.S.
      federal tax law, such amount will not be considered reportable W-2 income,
      but
      instead non-taxable benefits expense. 

     

    The
      Employee must receive written evidence that the Company maintains directors'
      and
      officers' insurance to cover in an amount reasonably acceptable to the Employee
      at no additional cost to the Employee, and the Company will maintain such
      insurance at all times while this agreement remains in effect.

     

    Furthermore,
      the Company will maintain such insurance coverage with respect to occurrences
      arising during the term of this agreement for at least three years following
      the
      termination or expiration of this agreement or will purchase a directors' and
      officers' extended reporting period, or "tail," policy to cover the Tatum
      Partner.

     

    The
      Company agrees to indemnify the Employee to the full extent permitted by the
      Company’s Certificate of Incorporation (as amended) for any losses, costs,
      damages, and expenses, including reasonable attorneys' fees, as they are
      incurred, in connection with any cause of action, suit, or other proceeding
      arising in connection with the Employee's employment with the Company


     

    Termination

     

    The
      Company may terminate the Employee's employment for any reason upon at least
      30
      days' prior written notice to the Employee, such termination to be effective
      on
      the date specified in the notice, provided that such date is no earlier than
      30
      days from the date of delivery of the notice. Likewise, the Employee may
      terminate his or her employment for any reason upon at least 30 days' prior
      written notice to the Company, such termination to be effective on the date
      30
      days following the date of the notice. The Employee will continue to render
      services and to be paid during such 30-day period, regardless of who gives
      such
      notice. The Employee may terminate this agreement immediately if the Company
      has
      not remained current in its obligations under this letter or the Resources
      Agreement between the Company and Tatum or if the Company engages in or asks
      the
      Employee to engage in or to ignore any illegal or unethical conduct.


     

    This
      agreement will terminate immediately upon the death or disability of the
      Employee or upon termination by the Company of Employee’s employment for cause.
      For purposes of this agreement, disability will be as defined by the applicable
      policy of disability insurance or, in the absence of such insurance, by the
      Company's Board of Directors acting in good faith.

     

    
      
         

      

      
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    The
      Employee's salary will be prorated for the final pay period based on the number
      of days in the final pay period up to the effective date of termination or
      expiration.

     

    Severance
      Payment

     

    If
      the
      termination of this agreement is within 90 days of the Beginning Date, the
      Employee will be entitled to receive a Severance Payment (as defined below)
      equal to one month's salary. After 90 days of employment, the Employee will
      be
      entitled to receive a Severance Payment equal to two months' salary. For each
      six month period of employment commencing on the 91st
      day of
      employment, the Employee will receive an additional month's salary as Severance
      Payment, provided that the total aggregate Severance Payment will be limited
      to
      a maximum of six months' salary. If this agreement is terminated by the Company
      without cause or the required notice, or by the Employee for cause, the Employee
      will be entitled to receive the termination payments noted in this paragraph,
      plus one additional month's compensation for early termination, plus all cash
      bonuses, equity, and other compensation covered by this agreement will vest
      immediately and become payable at the date of termination. Notwithstanding
      any
      provisions herein to the contrary, no severance payments shall be payable if
      the
      Company terminates the Employee’s employment for cause.

     

    Miscellaneous

     

    This
      agreement contains the entire agreement between the parties with respect to
      the
      matters contained herein, superseding any prior oral or written statements
      or
      agreements.

     

    The
      Company agrees to allow Tatum to use the Company’s logo and name on Tatum’s
      website and other marketing materials for the sole purpose of identifying the
      Company as a client of Tatum. Tatum will not use the Company’s logo or name in
      any press release or general circulation advertisement without the Company’s
      prior written consent. 

     

    The
      provisions in this agreement concerning the payment of salary and bonuses and
      severance will survive any termination or expiration of this
      agreement.

     

    The
      terms
      of this agreement are severable and may not be amended except in a writing
      signed by the parties. If any portion of this agreement is found to be
      unenforceable, the rest of this agreement will be enforceable except to the
      extent that the severed provision deprives either party of a substantial portion
      of its bargain.

     

    This
      agreement will be governed by and construed in all respects in accordance with
      the
      laws of
      the State of California,
      without
      giving effect to conflicts-of-laws principles.

     

    Each
      person signing below is authorized to sign on behalf of the party indicated,
      and
      in each case such signature is the only one necessary.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Please
      sign below and return a signed copy of this letter to indicate your agreement
      with its terms and conditions.

     

    Sincerely
      yours,

     

    
      	
              BPO
                Management Services, Inc.

              By:
                Patrick Dolan

               

              Signature_________________________

              Name:
                Patrick
                Dolan

              Title:
                Chairman & CEO 

            	 
	
               

              Acknowledged
                and agreed by:

            
	 	
              EMPLOYEE:

               

              ______________________________

              (Signature)

               

              Donald
                W Rutherford

               

              Date:________________

            


    

    
 

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