Summary of BPO MANAGEMENT SERVICES

ITEM 1.01 Entry into a Material Definitive Agreement.

Merger Agreement

On September 5, 2008, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Healthaxis Inc., a Pennsylvania corporation ("Healthaxis"), and Outsourcing Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Healthaxis ("Merger Sub"), providing for the merger of Merger Sub with and into us.

In connection with the Merger Agreement, Healthaxis will issue shares of its common stock ("Common Stock") and shares of a new series of its preferred stock, designated as Healthaxis Series B Convertible Preferred Stock ("Series B Preferred Stock"), in exchange for the outstanding stock and certain warrants held by our stockholders. Healthaxis has also agreed with us that all of our outstanding options and certain warrants will become exercisable for shares of Healthaxis' Common Stock. Based on the fixed exchange ratios contained in the Merger Agreement, it is expected that immediately following the closing of the Merger, our current security holders will own approximately 80% of Healthaxis and current Healthaxis security holders will own approximately 20% of Healthaxis, on a fully-diluted basis. Following the Merger, our preferred stockholders will, through their ownership of Healthaxis Series B Preferred Stock, hold a liquidation preference of $0.84 per share. The surviving public company will be re-named "BPO Management Services, Inc."

Each of Healthaxis and we have made various representations, warranties and covenants to the other in the Merger Agreement, including, among others, not to
(a) solicit proposals relating to alternative business combination or acquisition transactions or (b) subject to certain exceptions which permit each respective company's board of directors to comply with its fiduciary duties, enter into discussions concerning, or provide confidential information in connection with, alternative business combination or acquisition transactions. Subject to certain exceptions that permit each company's board of directors to comply with its fiduciary duties, Healthaxis board of directors has agreed to recommend that its stockholders vote in favor of the Merger, as contemplated by the Merger Agreement. The Merger Agreement also includes covenants pertaining to the operation of each company's business and other matters between execution of the Merger Agreement and the closing of the Merger. Finally, the Merger Agreement contemplates that we will enter into an employment agreement with each of the top four members of Healthaxis management, which employment agreements will become effective upon the closing of the Merger.

Consummation of the Merger is subject to various conditions, including, among others, the completion of certain pre-merger steps by Healthaxis, the approval of the transactions contemplated by the Merger Agreement by the stockholders of both companies, and the absence of certain legal impediments to consummation of the Merger.

The Merger Agreement contains certain termination rights and provides that, upon the termination of the Merger Agreement under specified circumstances, either Healthaxis or we may be required to pay the other a termination fee of $500,000.

Healthaxis Pre-Merger Steps

As a condition to the closing of the Merger , Healthaxis is required to complete the following pre-merger steps: (1) termination of agreements with, and warrants issued to, Tak Investments, Inc.; (2) conversion of all currently outstanding shares of Healthaxis Series A Convertible Preferred Stock (the "Series A Preferred Stock") into shares of Common Stock, termination of a warrant issued to LB I Group, Inc., and termination of the agreements entered into with LB I Group Inc. and other former holders of the Series A Preferred Stock; (3) termination of a warrant held by Lewis Opportunity Fund, L.P.; (4) amendment of the Remote Resourcing Agreement with Healthcare BPO Partners, L.P.; (5) creation of a new series of preferred stock, to be designated the "Series B Convertible Preferred Stock"; (6) authorization and approval of an additional 3,000,000 shares of Common Stock (without giving effect to the reverse split referenced in section (7) below) to the Healthaxis Inc. 2005 Stock Incentive Plan (or a new Healthaxis plan); (7) the effectuation of a reverse split of Healthaxis' shares of Common Stock, and (8) the change of Healthaxis' corporate name to "BPO Management Services, Inc."

Terms of New Series B Convertible Preferred Stock

Subject to the successful consummation of the Merger, the holders of the new Healthaxis Series B Preferred Stock will be entitled to receive dividends pari passu with dividends paid to holders of Healthaxis Common Stock. Dividends will be payable in cash upon a conversion, or in shares of Common Stock if certain conditions are met. Dividends will be payable upon a preferred stock redemption, the liquidation of the Healthaxis and upon other fundamental changes.

The holders of Series B Preferred Stock will not be entitled to general voting rights. However, for so long as a specified number of shares of Series B Preferred Stock are outstanding, the holders of Series B Preferred Stock will be entitled to vote as a class, and therefore have veto rights on the sale of the Healthaxis, changes in capitalization, repurchases of stock, and other matters. For so long as a specified number of shares of Series B Preferred Stock are outstanding, the holders of Series B Preferred Stock will have the right to elect one director.

Upon liquidation, the holders of Series B Preferred Stock will be entitled to receive $0.84 per share prior to the receipt of any value by the holders of the Healthaxis' Common Stock or other junior stock. The holders of Series B Preferred Stock will also be entitled to a preferential redemption equal to the liquidation preference amount plus dividends in the event of a "major transaction" or a "triggering event," as defined in the Certificate of Designation relating to the Series B Preferred Stock.

Holders of Series B Preferred Stock will be able to convert their shares into shares of Common Stock at any time. Initially, the Series B Preferred Stock will convert on a one-to-one basis, subject to adjustment.

The Series B Preferred Stock will be redeemable by the Healthaxis and at the option of the holders in certain circumstances.

Exempt Issuance of Merger Securities

We expect that the securities to be issued by Healthaxis as consideration in the Merger (the "Merger Securities") will be issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended. In this regard, Healthaxis has agreed to pursue approval of the terms of the Merger through a California fairness hearing, which approval, if obtained, would provide an exemption from the registration requirements of the Securities Act of 1933. Pursuant to such exemption, the Merger Securities would not be considered "restricted securities" for purposes of Rule 144 promulgated under the Securities Act. In the event that such California approval is not obtained, Healthaxis has agreed that, at its election, it shall use commercially reasonable efforts to prepare and file with the SEC a registration statement on Form S-4 or other comparable form in which a proxy statement to solicit and obtain the approval of our stockholders as contemplated by the Merger Agreement will be included.

Listing on Nasdaq Capital Market

In accordance with the rules of The Nasdaq Stock Market, the Merger will be deemed a "reverse merger" because Healthaxis will be combining its operations with ours and, accordingly, will experience a "change of control." As a consequence, in order for the post-Merger entity to retain its listing on the Nasdaq Capital Market, the post-merger entity will be required to submit an Initial Listing Application and satisfy the "initial listing standards" of the Nasdaq Capital Market. At this time, it is not clear whether post-Merger Healthaxis will be able to satisfy these standards. Obtaining the listing is not a condition to closing the Merger.

The foregoing descriptions of the Merger Agreement and other documents referenced hereinabove and herein below do not purport to be complete and are qualified in their entirety by reference to the full text of the Merger Agreement and such other documents, which are filed as Exhibits hereto. The Merger Agreement and other documents are included to provide investors and security holders with information regarding the terms of the Merger and related transactions. The Merger Agreement and such other documents are not intended to provide any other factual information about us or the other parties thereto. The Merger Agreement contains representations and warranties the parties thereto made to each other and are solely for the benefit of each other. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with signing the Merger Agreement. Accordingly, investors and security holders should not rely on the representations and warranties as characterizations of the actual state of facts, since they were only made as of the date of the Merger Agreement and are modified by the underlying disclosure schedules. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Healthaxis' public disclosures. We agree to furnish supplementally a copy of any omitted disclosure schedule to the Merger Agreement to the Securities and Exchange Commission upon request.

Other Recent Transactions

We amended the Certificate of Designation of the Relative Rights and Preferences of our Series D Convertible Preferred Stock (the "Series D Certificate of Designation"), the Certificate of Designation of the Relative Rights and Preferences of our Series D-2 Convertible Preferred Stock (the "Series D-2 Certificate of Designation"), and the Certificate of Designation of the Relative Rights and Preferences of our Series F Convertible Preferred (the "Series F Certificate of Designation" and, together with the Series D Certificate of Designation, and the Series D-2 Certificate of Designation, the "Certificates of Designation"), to provide that the "Conversion Restrictions" (as more particularly described in the Certificates of Designation) apply to the affiliates of each of the holders of shares in each such series of Convertible Preferred Stock.

On June 13, 2007, we privately placed shares of our Series D Convertible Preferred Stock and various common stock and Series D-2 preferred stock purchase warrants to a limited number of institutional investors for gross proceeds of approximately $14,000,000. C.E. Unterberg, Towbin, Inc., acted as our placement agent. The private placement was exempt from registration under the Securities Act of 1933, as amended, in reliance upon Rule 506 of Regulation D or Section 4(2) for transactions not involving a public offering.

We intend to use the proceeds to complete previously announced acquisitions, fund additional growth in accordance with our business plan, and for general working capital requirements.

Copies of the transaction documents referenced herein and our June 14, 2007, press release announcing these transactions are attached as Exhibits to this Current Report and are incorporated herein by reference.

Preferred Stock and Warrants

The shares of Series D Convertible Preferred Stock that we issued and sold are convertible into approximately 23.3 million shares of our common stock. The three-year Series A Warrants that we granted (initial exercise price of $.90 per share) are exercisable for the purchase of up to approximately 11.7 million shares of our common stock. The five-year Series B Warrants that we granted (initial exercise price of $1.25 per share) are exercisable for the purchase of up to approximately 23.3 million shares of our common stock. If exercised in full, the aggregate Series A Warrant and Series B Warrant proceeds will be approximately $40 million.

One-year Purchase Option

We also granted the investors a one-year option (in the form of Series J Warrants) to purchase up to $21 million of Series D-2 Convertible Preferred Stock, which is convertible into approximately 23.3 million shares of our common stock. At the closing and in connection with such option, we granted the investors three-year Series C warrants (initial exercise price of $1.35 per share), which are exercisable for the purchase of up to approximately 11.7 million shares of our common stock, and five-year Series D Warrants (initial exercise price of $1.87 per share), which are exercisable for the purchase of up to approximately 23.3 million shares of our common stock. The Series C Warrants and the Series D warrants vest only upon the exercise of the Series J Warrants. If exercised in full, the aggregate Series C Warrant and Series D Warrant proceeds will be approximately $60 million. There can be no assurance that any or all of the warrants will be exercised.

On June 13, 2007, we entered into a Series D Convertible Preferred Stock Purchase Agreement (the "Series D Purchase Agreement"), pursuant to which certain investors purchased shares of our Series D Convertible Preferred Stock and warrants to purchase shares of our Series D-2 Convertible Preferred Stock and common stock. Subsequent thereto, we amended the Series D Purchase Agreement. On August 29, 2008, we again amended its terms this time to increase the number of shares of our common stock underlying the permitted options further and amended it to eliminate certain financial covenants contained therein.

. . .

Item 9.01 Financial Statements and Exhibits.

(d)      Exhibits.

Exhibit No.   Description of Exhibit

3.10*         Certificate of Designation of the Relative Rights and
              Preferences of the Series F Convertible Preferred Stock
              of BPO Management Services, Inc., as filed with the
              Secretary of State of the State of Delaware on June 30,
              2008
3.11*         Certificate of Amendment to Certificate of Designation of
              the Relative Rights and Preferences of the Series D
              Convertible Preferred Stock of BPO Management Services,
              Inc., as filed with the Secretary of State of the State
              of Delaware on August 28, 2008
3.12*         Certificate of Amendment to Certificate of Designation of
              the Relative Rights and Preferences of the Series D-2
              Convertible Preferred Stock of BPO Management Services,
              Inc., as filed with the Secretary of State of the State
              of Delaware on August 28, 2008
3.13*         Certificate of Amendment to Certificate of Designation of
              the Relative Rights and Preferences of the Series F
              Convertible Preferred Stock of BPO Management Services,
              Inc., as filed with the Secretary of State of the State
              of Delaware on August 28, 2008
10.64*        Agreement and Plan of Merger dated September 5, 2008,
              among Healthaxis, Inc., Outsourcing Merger Sub., Inc.,
              and BPO Management Services, Inc.
10.65*        Amendment to Series D Convertible Stock Purchase
              Agreement dated August 28, 2009 between BPO Management
              Services, Inc. and certain investors
10.66*        Second Amendment to Series D Convertible Stock Purchase
              Agreement dated August 28, 2009 between BPO Management
              Services, Inc. and certain investors
10.67*        Second Amendment to Series A Warrant to Purchase Shares
              of Common Stock of BPO Management Services, Inc. dated
              August 29, 2008 between BPO Management Services, Inc. and
              certain investors
10.68*        Second Amendment to Series B Warrant to Purchase Shares
              of Common Stock of BPO Management Services, Inc. dated
              August 29, 2008 between BPO Management Services, Inc. and
              certain investors
10.69*        Fourth Amendment to Series C Warrant to Purchase Shares
              of Common Stock of BPO Management Services, Inc. dated
              August 29, 2008 between BPO Management Services, Inc. and
              certain investors
10.70*        Fourth Amendment to Series D Warrant to Purchase Shares
              of Common Stock of BPO Management Services, Inc. dated
              August 29, 2008 between BPO Management Services, Inc. and
              certain investors
10.71*        Waiver and Amendment Agreement dated August 29, 2008
              between BPO Management Services, Inc. and certain
              investors
10.72*        Amended and Restated Warrant Acknowledgement Agreement
              dated August 29, 2008 between BPO Management Services,
              Inc. and certain investors
10.73*        Third Amendment to Series D Convertible Stock Purchase
              Agreement dated as of August 29, 2008 between BPO
              Management Services, Inc. and certain investors
10.74*        Series F Convertible Preferred Stock Issuance Agreement
              dated as of August 29, 2008, between BPO Management
              Services, Inc. and certain investors

* filed herewith