EMPLOYMENT SEPARATION
AGREEMENT
This EMPLOYMENT
SEPARATION AGREEMENT (this “Agreement”) is made by and
between BPO Management Services, Inc., a Pennsylvania corporation
(the “Company”), BPOMS, Inc., a Delaware corporation,
f/k/a BPO Management Services, Inc., and an indirect
wholly owned subsidiary of the Company (“Former
BPOMS”), and Donald W. Rutherford (“Rutherford”),
as of the 6 th day of May, 2009.
WHEREAS, Former
BPOMS and Rutherford are parties to that certain letter agreement
dated as of January 26, 2007 (the “Employment
Agreement”), which sets forth, among other things, the terms
and conditions pursuant to which Rutherford was employed by Former
BPOMS and currently serves as Chief Financial Officer of the
Company and setting forth the amount of certain payments that would
be made to Rutherford upon termination of his employment in certain
circumstances;
WHEREAS, Former
BPOMS, the Company and Rutherford have mutually agreed to terminate
the Employment Agreement and Rutherford’s employment with
Former BPOMS and the Company on the terms provided in this
Agreement.
NOW, THEREFORE,
for and in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and
confessed, Former BPOMS, the Company and Rutherford do hereby agree
as follows:
1.
Termination of Employment Agreement and Rutherford’s
Employment . Former BPOMS, the Company and
Rutherford hereby acknowledge the existence of the Employment
Agreement, and the terms thereof, which are incorporated herein by
this reference, are modified in the following particulars only, and
this Agreement shall hereafter govern the relative rights, duties
and obligations of the parties. In addition, effective
as of close of business on May 15, 2009 (the “Termination
Date”), Rutherford’s employment with Former BPOMS and
as the Chief Financial Officer of the Company are hereby terminated
by mutual agreement. From the date of
execution of this Agreement through the Termination Date,
Rutherford shall continue to perform his normal duties as Chief
Financial Officer of the Company, including completion and
certification of the Form 10-Q for the period ending March 31,
2009. Following the Termination Date, Rutherford will
cooperate with the Company regarding outstanding business issues to
the extent reasonably requested by the Company and agreed upon by
the parties.
EMPLOYMENT
SEPARATION AGREEMENT – Page 1
2.
Severance and Other Post-Termination Payments and Rights
. Rutherford will receive his normal base salary through
the Termination Date, and any accrued but unused vacation pay per
the standard vacation policy. In addition, Rutherford
will be entitled to receive the following additional
post-termination payments and benefits:
(a)
Severance Pay . Rutherford will be paid a total
of $83,333.50 plus interest on the unpaid balance thereof
calculated at 10% per annum in severance (the “Total
Severance Amount”) payable over twelve (12) months in equal
installments on the normal payroll cycle beginning with the first
payroll following the Termination Date. These severance payments
will be subject to normal tax withholding. In the event
the Company successfully completes a capital raise, merger or sale
of assets that results in net receipts of at least $2,000,000
during this period, then the payment of the entire remaining unpaid
balance of the Total Severance Amount shall be accelerated and paid
on the next scheduled payroll cycle following the closing of the
funding transaction; Any payment not made when due shall be
immediately subject to a late charge in the sum of 1 ½% per
month or any part thereof until paid. If two or more payments in
succession are not made when due, Rutherford shall have the option
to accelerate the entire balance due plus all penalties and
interest and immediately exercise all of his rights under this
agreement, as set forth in paragraph 3 below. Upon any default as
described above, Rutherford shall be entitled to any and all
reasonable attorney’s fees and costs incurred in exercising
his rights hereunder.
(b)
Benefits . All benefits will terminate in
accordance with standard policies and practices as of the
Termination Date. For example, the medical insurance
reimbursement will end on the Termination Date and any matching
contributions in the 401(k) plan will not be made on severance
payments.
(c)
Extension of Post-Termination Exercise Rights on Stock
Options . Rutherford currently holds 98,680 options
to purchase Company common stock issued pursuant to the BPO
Management Services, Inc. 2003 Stock Option Plan with an exercise
price of $4.662 per share, and 172,690 options to purchase Company
common stock issued pursuant to the BPO Management Services, Inc.
2007 Stock Option Plan with an exercise price of $0.162 per
share. These options have previously fully
vested. The Company hereby agrees that these options
shall remain outstanding according to the original terms and shall
be exercisable for a period of twenty-four (24) months after the
Termination Date, subject to the terms of the applicable option
plan.
EMPLOYMENT
SEPARATION AGREEMENT – Page 2
(d)
Lap Top Computer and Cell Phone . The Company lap
top computer used by Rutherford shall be retained by Rutherford and
may be utilized to provide the cooperation and assistance
contemplated in Section 1 above regarding post-termination business
issues.
3.
Security . In order to secure payment of the of
Total Severance Amount outstanding from time to time, Rutherford is
hereby granted a security interest in and to the United States
assets of Former BPOMS. Rutherford acknowledges that
other assets of the Company that are not held at or below the
Former BPOMS subsidiary level are also expressly excluded,
including all assets of Healthaxis.com, Inc. and its downstream
subsidiaries including Healthaxis, Ltd. and Healthaxis Imaging
Services, LLC and their respective assets and
subsidiaries. In order to perfect this security
interest, Former BPOMS will execute and deliver to Rutherford a
UUC-1 Financing Statement upon full execution of this Agreement
which Rutherford may file in the appropriate records in Delaware
and California, at Rutherford’s expense. In the
event of a default by the Company and Former BPOMS in payment of
the severance installments pursuant to Subsection 2(a) above, and
following ten (10) days written notice from Rutherford to the
Company providing an opportunity to cure, Rutherford may enforce
his security interest in accordance with the laws of the state of
California.
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