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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

__________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):   October 21, 2008

BPO MANAGEMENT SERVICES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

0-28560	22-2356861
(Commission File Number)	(I.R.S. Employer Identification No.)

1290 N. Hancock, Ste 200, Anaheim, CA	92807
(Address of Principal Executive Offices)	(Zip Code)

 (714) 974-2670

 Registrant’s telephone number, including area code

  Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[X]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 1.01:  Entry into a Material Definitive Agreement.

On October 21, 2008, BPO Management Services, Inc., a Delaware corporation (the “Company” or “BPOMS”) entered into an amendment (the “Amendment”) to the Agreement and Plan of Merger (the “Merger Agreement”) with Outsourcing Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Healthaxis Inc. (“Healthaxis”).  The full text of the Amendment is filed herewith as Exhibit 10.1.  Under the terms of the Merger Agreement, Merger Sub will merge with and into BPOMS, with BPOMS surviving the merger and becoming a wholly-owned subsidiary of Healthaxis (the “Merger”).  In connection with the Merger, Healthaxis will issue shares of its common stock and shares of a new series of preferred stock, designated as Healthaxis Series B Convertible Preferred Stock, in exchange for the outstanding stock and certain warrants held by BPOMS securityholders.  The Amendment makes certain changes to the exchange ratios set forth in the Merger Agreement that are used to determine the amount of Healthaxis securities that will be issued in exchange for certain BPOMS securities.  Based on the fixed exchange ratios contained in the Amendment, it is expected that immediately following the closing of the merger, current BPOMS securityholders will own approximately 75% of the surviving public company and current Healthaxis securityholders will own approximately 25% of the surviving public company, on a fully-diluted, as-converted basis.

In addition, the Amendment changed the termination date set forth in the Merger Agreement from December 31, 2008 to January 31, 2009.

The Amendment also revises the terms of the termination fee initially set forth in the Merger Agreement.  Previously, under any circumstances giving rise to the payment of the termination fee pursuant to the terms of the Merger Agreement, the amount of the termination fee was $500,000.  Pursuant to the terms of the Amendment, Healthaxis shall pay BPOMS a termination fee of $1.0 million if the merger agreement is terminated:

·        by BPOMS or Healthaxis as a result of the Healthaxis board of directors failing to make, withdrawing or modifying adversely to BPOMS its approval or recommendation of the merger agreement, or Healthaxis entering into a definitive agreement providing for the implementation of a superior offer at any time on or after October 27, 2008; or

·        by Healthaxis after January 31, 2009 and if, prior to January 31, 2009, the Healthaxis board of directors received an “acquisition proposal” from another party and if Healthaxis then completes an acquisition transaction with that party at any time on or before December 31, 2009.

In addition, BPOMS shall pay Healthaxis a termination fee of $1.0 million if the Merger Agreement is terminated by BPOMS or Healthaxis as a result of the BPOMS board of directors failing to make, withdrawing or modifying adversely to Healthaxis its approval or recommendation of the merger agreement, or BPOMS’ entering into a definitive agreement providing for the implementation of a superior offer at any time on or after October 27, 2008.

The foregoing description of the Amendment and other documents referenced herein does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment and such other documents, which are filed as Exhibits hereto.  The Amendment and other documents are included to provide investors and security holders with information regarding the terms of the Merger and related transactions.

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Forward-Looking Statements

This report contains forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, particularly those statements regarding the effects of the proposed Merger and those preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” or similar expressions.  Forward-looking statements relating to expectations about future results or events are based upon information available as of today’s date, and there is no assumed obligation to update any of these statements.  The forward-looking statements are not guarantees of future performance, and actual results may vary materially from the results and exceptions discussed.  For instance, although BPOMS and Healthaxis have signed an agreement to merge, there is no assurance that they will complete the proposed merger.  The Merger Agreement will terminate if the companies do not receive necessary approvals from BPOMS’ stockholders and Healthaxis’ shareholders or if either BPOMS or Healthaxis fails to satisfy other conditions to closing.  Other risks and uncertainties to which the companies are subject are discussed in the companies’ reports filed with the Securities and Exchange Commission (the “SEC”) under the caption “Risk Factors” and elsewhere, including, without limitation, in BPOMS’ Annual Report on Form 10-KSB for the year ended December 31, 2007 and subsequent Quarterly Reports on Forms 10-QSB and 10-Q, and in Healthaxis’ Annual Report on Form 10-K for the year ended December 31, 2007 and subsequent Quarterly Reports on Form 10-Q.  Copies of BPOMS’ and Healthaxis’ filings with the SEC can be obtained on their websites, or at the SEC’s website at www.sec.gov.  One or more of these factors have affected, and could affect BPOMS’ and Healthaxis’ business and financial results in future periods, and could cause actual results related to the Merger to differ materially from plans and projections.  Any forward-looking statement is qualified by reference to these risks, uncertainties and factors.  Forward-looking statements speak only as of the date of the documents in which they are made.  These risks, uncertainties and factors are not exclusive, and the Company undertakes no obligation to publicly update or review any forward-looking statements to reflect events or circumstances that may arise after the date of this report, except as required by law.

Additional Information and Where to Find It

In connection with the proposed Merger, the Company has or will be filing a proxy statement and relevant documents concerning the transaction with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain free copies of the proxy statement and other documents when they become available by contacting the Company by mail at 1290 N. Hancock, Ste 200, Anaheim, CA 92807, Attn: Donald Rutherford, or by telephone at (714) 974-2670. In addition, documents filed with the SEC by the Company are available free of charge at the Securities and Exchange Commission’s website at http://www.sec.gov.

The Company and its directors, executive officers, other members of its management and employees may be deemed to be participants in the solicitation of proxies from the Company’s shareholders in connection with the proposed transaction. Information concerning the special interests of these directors, executive officers and other members of the Company’s management and employees in the proposed transaction will be included in the Company’s proxy statement described above. Information regarding the Company’s directors and executive officers is also available in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007. This document is available free of charge at the SEC’s website at www.sec.gov and from the Company as described above.

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Item 9.01.                      Financial Statements and Exhibits.

(d)           Exhibits:

Exhibit	Description
10.1	Amendment to Agreement and Plan of Merger, dated October 21, 2008, among Healthaxis Inc., Outsourcing Merger Sub, Inc., and BPO Management Services, Inc.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 27, 2008

 

BPO Management Services, Inc.

By:  /s/  Donald Rutherford                                      

Donald Rutherford,

Chief Financial Officer

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EX-10.1

EXHIBIT 10.1

AMENDMENT TO AGREEMENT AND PLAN OF MERGER

THIS AMENDING AGREEMENT (“Amending Agreement”) is made and entered into as of October 21, 2008 among HealthAxis Inc., a Pennsylvania corporation (“HealthAxis”), Outsourcing Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of HealthAxis (“Merger Sub”) and BPO Management Services, Inc., a Delaware corporation (“BPOMS”).  Each of HealthAxis, Merger Sub and BPOMS are sometimes referred to herein as a “Party” or, collectively, the “Parties”.

RECITALS

A. HealthAxis, Merger Sub and BPOMS entered into an agreement and plan of merger (the “Merger Agreement”) as of September 5, 2008 providing for a merger of Merger Sub into BPOMS and the issuance of shares of HealthAxis Common Stock and HealthAxis Series B Preferred Stock to the securityholders of BPOMS.

B. The Parties have agreed to amend certain provisions of the Merger Agreement, as provided by this Amending Agreement.

AGREEMENT

IN CONSIDERATION OF the foregoing and of the mutual covenants and agreements herein contained, the Parties agree as follows:

1. In this Amending Agreement, all capitalized terms which are not defined herein shall have the same meanings as set out in the Merger Agreement.

2. Each of the Exchange Ratios provided for by the Merger Agreement in respect of each class or series of BPOMS Stock and in respect of each series of the BPOMS Investor Warrants, BPOMS Non-Investor Warrants and BPOMS Options indicated below are hereby amended (and remain subject to adjustment after determination of the Reverse Split and otherwise in accordance with Section 3.6 of the Merger Agreement) to be the amounts hereinafter specified (and the definitions of each of the Exchange Ratios in the Merger Agreement shall be as so specified):

Class or Series of Stock, Warrants or Options	Amended Exchange Ratios
BPOMS Common Shares	0.2467 (“Exchange Ratio”)
BPOMS Series A Preferred Shares	0.2773 (“Exchange Ratio”)
BPOMS Series B Preferred Shares	0.2467 (“Exchange Ratio”)
BPOMS Series C Preferred Shares	1.2868 (“Series C Exchange Ratio”)
BPOMS Series D Preferred Shares	3.9475  (“Series D Exchange Ratio”)
BPOMS Series D-2 Preferred Shares	3.9475 (“Series D-2 Exchange Ratio”)
BPOMS Series F Preferred Shares	6.1679 (“Series F Exchange Ratio”)
BPOMS Series C Investor Warrant ($0.01)	0.2467 (“Series C Warrant Exchange Ratio”)
BPOMS Series D Investor Warrant ($0.01)	0.2467 (“Series D Warrant Exchange Ratio”)
BPOMS Outstanding Investor Warrants	0.2467 (“Exchange Ratio”)
BPOMS Non-Investor Warrants	0.2467 (“Exchange Ratio”)
BPOMS Options	0.2467 (“Exchange Ratio”)

3. Paragraph 9.1(h) of the Merger Agreement is hereby amended by changing the Termination Date from December 31, 2008 to January 31, 2009.

4. Paragraph 9.3(c) of the Merger Agreement is hereby deleted and replaced with the following:

“HealthAxis shall pay BPOMS a termination fee of $500,000 upon (i) termination of this Agreement by BPOMS pursuant to Section 9.1(d) at any time, or (ii) termination of this Agreement by BPOMS or HealthAxis pursuant to Section 9.1(f) at any time prior to October 27, 2008.   HealthAxis shall pay BPOMS a termination fee of $1,000,000: (x) upon termination of this Agreement by BPOMS or HealthAxis pursuant to Section 9.1(f) at any time on or after October 27, 2008, or (y) in the event that HealthAxis terminates this Agreement pursuant to Section 9.1(h) and, prior to the Termination Date, HealthAxis has received an Acquisition Proposal from another Person and HealthAxis then completes an Acquisition Transaction with that Person or any affiliate thereof at any time on or before December 31, 2009.”

5. Paragraph 9.3(d) of the Merger Agreement is hereby deleted and replaced with the following:

“BPOMS shall pay HealthAxis a termination fee of $500,000 upon (i) termination of this Agreement by HealthAxis pursuant to Section 9.1(c) at any time, or (ii) termination of this Agreement by HealthAxis or BPOMS pursuant to Section 9.1(g) at any time prior to October 27, 2008.   BPOMS shall pay HealthAxis a termination fee of $1,000,000 upon termination of this Agreement by HealthAxis or BPOMS pursuant to Section 9.1(g) at any time on or after October 27, 2008.”

6. All numerical references in the Merger Agreement to the number of BPOMS Series A Preferred Shares authorized or issued and outstanding shall be deemed to be 1,608,612.

7. All numerical references in the Certificate of Designation of the HealthAxis Series B Preferred Shares shall be adjusted consistent with the modification of the Exchange Ratios set forth in this Amending Agreement.

8. As and from the date of this Amending Agreement, all references in any other documents to the Merger Agreement shall be construed as references to the Merger Agreement, as amended hereby.  Except as expressly amended hereby, each and every provision of the Merger Agreement shall continue in full force and effect and is hereby confirmed, and all rights and obligations of the Parties shall not be affected in any manner except as specifically provided for in this Amending Agreement.

9. This Amending Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and all of which taken together shall be deemed to constitute one and the same instrument.

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IN WITNESS WHEREOF, the Parties hereto have executed this Amending Agreement as of the date first above written.

HEALTHAXIS INC.

Per:  /s/  John Carradine                                                      

OUTSOURCING MERGER SUB, INC.

Per:  /s/  John Carradine                                                       

BPO MANAGEMENT SERVICES, INC.

Per:  /s/  Patrick Dolan                                                           

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