Email files .eml are converted into .bad because the x-sender header is empty.
That means that exchange will not process them if it cannot find an "x-sender" in header.
To fix this please download the patch, extract it to:
"C:\Program Files (x86)\Red Earth Software\Policy Patrol Email" and run it.
After applying the patch monitor the "Replay" folder for a period to check if there are new .bad files.
Ex: Reference Ticket: #30198
PPE10_POP3_Update.zip (30 KB)