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:
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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.
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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.
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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.
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Employment
Agreement – Page
1
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(a)
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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.
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(b)
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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.
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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.
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Compensation
and Related Matters.
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(a)
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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).
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(b)
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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.
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Employment
Agreement – Page
2
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(c)
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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
(1/9 th
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.
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(d)
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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.
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(e)
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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.
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(f)
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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.
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(g)
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Car
Allowance. A monthly car allowance of $650 .
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(h)
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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.
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Employment
Agreement – Page
3
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(i)
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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.
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(j)
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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.
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Termination.
The Employee’s employment hereunder may be terminated during
the Employment Period under the following circumstances:
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(a)
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Death. The
Employee’s employment hereunder shall terminate upon his
death.
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(b)
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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.”
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(c)
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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:
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(i)
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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
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(ii)
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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
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Employment
Agreement – Page
4
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(iii)
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breach of this
Agreement by Employee; or
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(iv)
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any attempt by
Employee to improperly secure any personal profit in connection
with the business of the Company or any of its affiliates;
or
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(v)
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chronic
alcoholism or drug addiction.
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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.
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(d)
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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.
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(e)
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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.
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(f)
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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”):
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(i)
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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
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