Exhibit 10.1

 

KAREN CLARY EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and
between Datalink Corporation, a Minnesota corporation (the “Company”), and Karen
Clary (the “Executive”) effective as of the 16th day of January, 2012.

 

R E C I T A L S:

 

WHEREAS, the Company is a provider of data center infrastructure, solutions and
services; and

 

WHEREAS, the Company and the Executive desire to set forth in this Agreement the
terms under which Executive will serve as Executive Vice President — Human
Resources of the Company;

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                      Employment and Duties.  The Company
hereby agrees to employ the Executive, and the Executive hereby accepts the
Company’s offer to serve, as Executive Vice President — Human Resources of the
Company.  As such, the Executive shall have responsibilities, duties and
authority reasonably accorded to and expected of such an officer of the Company
and will report to the Company’s President and Chief Executive Officer.  The
Executive agrees to devote the Executive’s full business time, attention and
efforts to promote and further the business of the Company.  The Executive will
faithfully adhere to, execute and fulfill all policies established by the
Board.  The Executive will be based out of the Company’s corporate office.

 

The Executive will not, during the Term of Executive’s employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with the Executive’s duties and
responsibilities hereunder.  The foregoing limitations will not be construed to
prohibit the Executive from making personal investments in such form or manner
as will neither require the Executive’s services in the operation or affairs of
the companies or enterprises in which such investments are made nor violate the
terms of Section 4 hereof.

 

2.                                      Compensation.  For all services rendered
by the Executive on and after the date hereof, the Company will compensate the
Executive as follows:

 

(a)                                 Base Salary.  Commencing on the date hereof,
the base salary payable to the Executive shall be $240,000 per year, payable on
a regular basis in accordance with the Company’s standard payroll procedures but
not less than semi-monthly.  Such base salary will be subject to review and
adjustment from time to time by the Company’s Compensation Committee (the
“Compensation Committee”).

 

(b)                                 Incentive Bonus Plan.  During the Term and
beginning for 2012, the Executive is entitled to an annual cash bonus (the
“Annual Bonus”) based on attainment of particular financial and business
milestones (the “Performance Milestones”).  The Annual Bonus for attainment of
100% of the Performance Milestones for a particular year will be such percentage
of base salary as set from time to time by the Compensation Committee.

 

(i)                                     Performance Milestones.  The Executive
and the Company shall mutually agree upon the Performance Milestones for each
fiscal year by March 1 of each year, and the level of Annual Bonus payable for
any partial or excess achievement of the Performance Milestones.  In the event
of any disagreement, the Compensation Committee will determine the percentage of
the annual Performance Milestone targets achieved by the Executive.

 

(ii)                                  Payment.  Each Annual Bonus amount is
payable by March 15 of the following calendar year or, if sooner, on the date
that the Company distributes annual bonus payments to its other senior executive
officers.

 

(c)                                  Executive Perquisites, Benefits and Other
Compensation.  Commencing on the date hereof, the Executive shall be entitled to
receive additional benefits and compensation from the Company in such form and
to such extent as provided to other senior executive officers from time to
time.  Initially, these additional items are specified below:

 

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(i)                                     A $500.00 per month car allowance and
reimbursement for use of a corporate cell phone, all in accordance with Company
policy.

 

(ii)                                  Reimbursement for all business travel,
other than auto expense, and other out-of-pocket expenses reasonably incurred by
the Executive in the performance of the Executive’s services pursuant to this
Agreement.  All reimbursable expenses shall be appropriately documented in
reasonable detail by the Executive upon submission of any request for
reimbursement, and in a format and manner consistent with the Company’s expense
reporting policy.

 

3.                                      Grant of Restricted Stock.  In further
consideration of this Agreement, the Company hereby awards to the Executive
$240,000 of common stock shares, par value $.001 per share, of the Company (the
“Common Stock”), subject to the conditions and restrictions set forth below (the
“Restricted Stock”).

 

(a)                                 Rights Regarding Restricted Stock.  The
Restricted Stock issued to the Executive shall constitute issued and outstanding
shares of the Company’s Common Stock for all corporate purposes.  Except as
provided by Section 3(b) below, the Executive will have the right to (a) vote
the Restricted Stock, (b) receive and retain dividends and distributions, if
any, that the Company designates, pays and distributes generally with respect to
its Common Stock and (c) exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Restricted Stock.

 

(b)                                 Restrictions on Restricted Stock.  Despite
the above, the Executive’s rights to fully enjoy the ownership of the Restricted
Stock are subject to the Executive’s vesting in the Restricted Stock as provided
by Section 3(c) below.  Pending such vesting, the Executive’s ownership of the
Restricted Stock is subject to the following:

 

(i)                                     Company Retention of Unvested Restricted
Stock.  When issuing the Restricted Stock, the Company shall register the
Restricted Stock in the name of the Executive, but shall hold the stock
certificate, together with a stock power endorsed by the Executive in blank,
pending vesting by the Executive in all or a portion of the Restricted Stock. 
If at the end or during the four years from and after the date hereof (such
period being the “Restricted Period”), the Executive vests in all or a portion
of the Restricted Stock, the Company will promptly reissue a certificate
representing the vested portion of the Restricted Stock and deliver such
certificate to the Executive.  Any such reissued certificate shall contain a
legend prohibiting sale or other transfer of the shares of Common Stock without
registration under the Securities Act of 1933, as amended (the “Securities
Act”), or an exemption therefrom.

 

(ii)                                  Company Retention of Dividends and
Distributions on Unvested Restricted Stock.  In the event that the Company
declares and pays a dividend or other distribution on its Common Stock, the
Company shall retain custody of all such dividends and distributions (the
“Retained Distributions”) made or declared with respect to the unvested portion
of the Restricted Stock.  The Company is not required to segregate the Retained
Distributions in a separate or interest-bearing account, but payment thereof by
the Company upon vesting of the Restricted Stock shall be a general, unsecured
obligation of the Company.  If at the end or during the Restricted Period, the
Executive vests in all or a portion of the Restricted Stock, the Company shall
promptly pay or distribute to the Executive (without any interest) the portion
of the Retained Distributions held by the Company that relate to the vested
portion of the Restricted Stock.

 

(iii)                               Restriction on Transfer of Restricted
Stock.  Except for a transfer without consideration to a trust for the benefit
of the Executive and/or the Executive’s spouse and children (and then only if
the trust agrees to be bound by the restrictions of this Agreement on the
Restricted Stock so transferred), the Executive may not sell, assign, transfer,
pledge, exchange, encumber or dispose of the Restricted Stock or any Retained
Distributions or the Executive’s interest in any of them until vested therein.

 

(c)                                  Vesting of Restricted Stock.  The Executive
will vest in all or a portion of the Restricted Stock (and the Retained
Distributions, if any, related thereto), as follows:

 

(i)                                     Service-Based Vesting.  The Executive
will vest in 50% of the Restricted Stock (and the Retained Distributions, if
any, related thereto) on the second anniversary hereof if the Executive has been
employed with the Company continuously from the date hereof to such date.  The
Executive will vest in an additional 25% of the Restricted Stock (and the
Retained Distributions, if any, related thereto) on the third anniversary hereof
if the Executive has been employed with the Company continuously from the date
hereof to such date.  The Executive will vest in the last 25% of the Restricted
Stock (and the Retained Distributions, if any, related thereto) on the last date
of the Restricted Period if the Executive has been employed with the Company
continuously from the date hereof to such date.

 

(ii)                                  Vesting Upon a Change of Control.  Subject
to Section 5(f) below, all of the Restricted Stock (and all Retained
Distributions, if any) will vest upon a Change of Control event (as defined
below) that occurs during the Term hereof, but only if (i) the Executive has
been employed with the Company continuously from the date hereof to the date of
the Change of Control and (ii) the Change of Control Price (as defined below)
exceeds $             (the closing price of the Company’s Common Stock on the

 

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date hereof).  However, if the Change of Control event is an event described in
Section 3(c)(ii)(A)(2) below, then (subject to Section 5(f) below) vesting under
this Section 3(c)(ii) will occur if the Executive has been employed with the
Company continuously from the date hereof to the date of the Change of Control,
regardless of the Change of Control Price.

 

(A)                               Change of Control.  A “Change of Control”
means the happening of any of the following events:

 

(1)                                 An acquisition of outstanding or newly
issued Company securities that results in any individual, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1933, as amended (a “Person,” with such Act being the “Exchange Act”) having
beneficial ownership within the meaning of Rule 13d-3 under the Exchange Act
(“Beneficial Ownership”) of more than 50% (other than any Person who, as of the
date hereof, already has Beneficial Ownership of at least 20%) of either (x) the
then outstanding shares of the Company’s Common Stock (the “Outstanding Company
Common Stock”) or (y) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); or

 

(2)                                 A change in the composition of the Board in
connection with a tender or exchange offer, a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation (a
“Corporate Transaction”) or a direct purchase of securities from the Company
such that (i) the individuals who, as of the date hereof, constitute the members
of the Board (the “Incumbent Board,” it being intended that the Executive is not
considered a member of the Incumbent Board at the date hereof) cease to
constitute at least a majority of the Board or (ii) a majority of the
individuals who, as of the date hereof, constitute the Incumbent Board resign or
are removed from the Board;  provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents;
or

 

(3)                                 The approval by the shareholders of the
Company of a Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation);  excluding, however, such a
Corporate Transaction pursuant to which (1) all or substantially all of the
Beneficial Owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
Beneficially Own, directly or indirectly, more than 50% of the outstanding
shares of common stock, or more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, of the company resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (2) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or such corporation resulting from such Corporate Transaction) will
Beneficially Own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction and (3) individuals who were members
of the Incumbent Board will constitute at least a majority of the board of
directors of the corporation resulting from such Corporate Transaction;  or

 

(4)                                 The approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.

 

Despite all of the foregoing, no Change in Control is deemed to have occurred
with respect to the Executive if the Executive is part of a purchasing group
which consummates the Change in Control transaction.  The Executive is deemed
“part of a purchasing group” for purposes of the preceding sentence if the
Executive is an equity participant in the purchasing company or group except for
(i) passive ownership of less than three percent (3%) of the stock of the
purchasing company or (ii) ownership of an equity participation in the
purchasing company or group which is otherwise not significant, as determined
prior to the Change in Control by a majority of the Incumbent Board.

 

(B)                               Change of Control Price.  “Change of Control
Price” means the higher of (i) the highest reported closing price of a share of
Common Stock in any transaction reported on the Nasdaq Stock Market during the
30-day period

 

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prior to and including the date of a Change of Control or (ii) if the Change of
Control is the result of a tender or exchange offer, a Corporate Transaction or
a direct purchase of securities from the Company, the highest price per share of
Common Stock paid in such tender or exchange offer, Corporate Transaction or
direct purchase of securities.

 

If the Change of Control is the result of a direct purchase of securities from
the Company for a consideration consisting in whole or in part other than cash,
then:

 

(i)                                     insofar as the purchase consideration
consists of securities and the value of such securities is not determinable by
reference to a separate agreement, (A) if the securities are then traded on a
national securities exchange or the Nasdaq Stock Market (or a similar national
quotation system), then the value shall be computed based on the average of the
closing prices of the securities on such exchange or system over the thirty
(30)-day period ending on the date of receipt by the Company, (B) if the
securities are actively traded over-the-counter, then the value shall be
computed based on the average of the closing bid prices over the thirty (30) day
ending on the date of receipt by the Company and (C) if there is no active
public market, then the value shall be computed based on the fair market value
thereof on the date of receipt by the Company, as determined in good faith by
the Board and

 

(ii)                                  insofar as the purchase consideration
consists of property other than cash and securities, then the value shall be
computed at the fair market value thereof at the time of such issuance, as
determined in good faith by the Board.

 

(d)                                 Effect of Termination of Service.  In the
event the Executive’s employment with the Company ceases for any reason
whatsoever (except upon a Change of Control), all Restricted Stock awarded to
the Executive (and the related Retained Distributions, if any) that has not
previously vested shall be forfeited as of the date of such termination.

 

(e)                                  Other Cancellation of Unvested Restricted
Stock and Retained Distributions.  The Company will cancel any Restricted Stock
and Retained Distributions that the Executive has not vested in by the last day
of the Restricted Period.  In addition, if the Compensation Committee determines
that the Executive has materially breached any of the provisions, restrictions,
terms or conditions of this Agreement or as established by the Compensation
Committee with respect to any Restricted Stock or Retained Distributions, the
Executive will forfeit all then Beneficially Owned Restricted Stock and Retained
Distributions.

 

(f)                                   No Code Section 83(b) Election.  The
Executive shall not make an election, under Section 83(b) of the Internal
Revenue Code of 1986, as amended (the “Code”), to include an amount in income in
respect of the Restricted Stock.

 

(g)                                  Non-Alienation of Benefits.  Other than
pursuant to a qualified domestic relations order, no right or benefit under this
Section 3 shall be subject to transfer, anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, whether voluntary, involuntary or by
operation of law, and any attempt to transfer, anticipate, alienate, sell,
assign, pledge, encumber or charge the same shall be void.

 

(h)                                 Subscription Representations;  Transfer
Restrictions.  The Executive understands that the Restricted Stock constitutes
“restricted securities” within the meaning of the Securities Act.  Accordingly,
even if the Executive is fully vested in the Restricted Stock, the Executive may
never be able to resell the underlying shares for a profit, or at all.  In any
event, the Executive will be able to resell or otherwise transfer the Restricted
Stock only if the sale or other transfer is registered under the Securities Act
and applicable state securities laws or there is an available exemption from
this registration.  The Executive confirms that the Executive can bear the loss
of the Executive’s entire investment in the Company.

 

(i)                                     Lock-Up Agreement.  The Executive agrees
that, in the event of each future public offering of the Company’s equity
securities (an “Offering”), the Executive will agree to such restrictions on the
resale of any shares of the Company’s Common Stock (including the Restricted
Stock) then beneficially owned by Executive as requested by the managing
underwriter or underwriters of the Offering;  provided, however, that such
restrictions run no longer than the period of resale restriction imposed by such
underwriters on the Company’s other executive officers and directors.  The
Executive agrees not to sell or otherwise transfer (including upon death) any of
the shares of Common Stock (including the shares of Restricted Stock)
beneficially owned by the Executive, unless the purchaser or recipient agrees in
writing to be bound by the foregoing lock-up agreement.

 

(j)                                    Stock Certificate Restrictions.  The
Executive acknowledges that the Company will place a restrictive legend on any
certificate representing the Restricted Stock, and a “stop transfer order” with
any transfer agent of the Company’s securities, barring the sale or other
transfer of such shares except in compliance with this Agreement and without
registration under the Securities Act or an exemption therefrom, and noting the
existence of the lock-up agreement above.

 

(k)                                 Future Grants of Equity Securities.  Future
grants of restricted stock, stock options or other equity securities, if any,
will be governed by the terms of the grant agreement to which the future grant
relates, and not by this Agreement.

 

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4.                                      Non-Competition and Non-Solicitation.

 

(a)                                 Basic Terms.  In consideration of this
Agreement (including the Restricted Stock grant hereunder), the Executive will
not, during the period of the Executive’s employment with the Company and for a
period of one (1) year immediately following the termination of the Executive’s
employment under this Agreement, for any reason whatsoever, directly or
indirectly, for the Executive or on behalf of or in conjunction with any other
person, firm, entity, company, business, partnership, corporation, limited
liability company or limited liability partnership of whatever nature:

 

(i)                                     engage, as an officer, director,
shareholder, owner, partner, joint venturer or in a managerial capacity, whether
as an employee, independent contractor, consultant or advisor or as a sales
representative or executive, in any business that, at the date of the
Executive’s termination of employment, manufactures, markets and/or sells
hardware and/or software products and/or services in competition with the
Company in the United States;

 

(ii)                                  recruit, solicit, hire or induce, or
attempt to recruit, hire or induce, any employee or employees to terminate
employment or otherwise cease his, her or their relationship with the Company;

 

(iii)                               solicit, divert or take away, or attempt to
solicit, divert or to take away, the data storage hardware and/or software
products and/or services business or patronage of any of the Company’s actual or
prospective clients, customers or accounts contracted, solicited or served by
the Company during Executive’s employment; or

 

(iv)                              call upon or solicit any prospective
acquisition candidate or individual or groups of employees of other
organizations, which, to the Executive’s actual knowledge after due inquiry, the
Company has called upon or for which the Company has made an acquisition or
hiring analysis, for the purpose of acquiring such entity or its assets or
hiring such individuals.

 

Notwithstanding the above, the Executive may acquire as a passive investment not
more than three percent (3%) of the capital stock of a competing business, whose
stock is traded on a national securities exchange or over-the-counter.

 

(b)                                 Equitable Relief.  Because of the difficulty
of measuring economic losses to the Company as a result of a breach of the
foregoing covenants, and because of the immediate and irreparable damage that
could be caused to the Company for which it would have no other adequate remedy,
the Executive agrees that the foregoing covenants may be enforced by the Company
in the event of breach by the Executive by injunctions and restraining orders.

 

(c)                                  Severability and/or Reformation.  The
covenants in this Section 4 are severable and separate, and the unenforceability
of any specific covenant shall not affect the provisions of any other covenant. 
Moreover, in the event any court of competent jurisdiction determines that the
scope, time or territorial restrictions set forth are unreasonable, then it is
the intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall be reformed in
accordance therewith.

 

(d)                                 Independently Enforceable.  All of the
covenants in this Section 4 shall be construed as an agreement independent of
any other provision in this Agreement, and the existence of any claim or cause
of action of the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of such covenants.  It is specifically agreed that the period of one
(1) year following termination of employment stated at the beginning of this
Section 4, during which the agreements and covenants of the Executive made in
this Section 4 shall be effective, shall be computed by excluding from such
computation any time during which the Executive is in violation of any provision
of this Section 4.

 

5.                                      Term; Termination; Rights on
Termination.

 

The term of Executive’s employment under this Agreement (the “Term”) begins on
the date hereof and continues through the earlier to occur of (i) the second
anniversary of the date hereof or (ii) the first day of the month next following
the Executive’s 65th birthday (the “Normal Retirement Date”);  provided,
however, that on the second anniversary of the date hereof, and on each
successive second anniversary thereafter (such date and each second anniversary
thereof shall be hereinafter referred to as the “Renewal Date”), the Term will
automatically extend so as to terminate on the earlier of (x) two years from
such Renewal Date or (y) the Executive’s Normal Retirement Date, unless at least
90 days prior to the Renewal Date, the Company gives written notice to the
Executive that the Company is not extending the Term.  Despite the Term, this
Agreement and the Executive’s employment may be terminated in any one of the
following ways:

 

(a)                                 Termination Upon Death.  The Executive’s
death will immediately terminate this Agreement.  The Company will pay the
Executive’s estate any of Executive’s accrued base salary and any earned, but
unpaid, Annual Bonus through the date of

 

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termination and at the time otherwise payable under this Agreement (i.e., after
the end of the applicable service period provided it is earned and on a prorated
basis) and reimbursement of expenses.  The Executive’s estate will forfeit any
Restricted Stock (and the related Retained Distributions) not vested in the
Executive as of the date of the Executive’s death.

 

(b)                                 Termination on Account of Disability.  If,
as a result of incapacity due to physical or mental illness or injury, as
reasonably determined by the Executive’s physician, the Executive is absent from
the Executive’s full-time duties hereunder for ninety (90) days, then thirty
(30) days after receiving written notice (which notice may occur before or after
the end of such 90-day period, but which will not be effective earlier than the
last day of such 90-day period), the Company may terminate the Executive’s
employment hereunder;  provided that the Executive is unable to resume the
Executive’s full-time duties at the conclusion of such notice period.  The
Company will pay the Executive any of the Executive’s accrued base salary and
any earned, but unpaid, Annual Bonus through the date of termination and at the
time otherwise payable under this Agreement (i.e., after the end of the
applicable service period provide it is earned and on a prorated basis) and
reimbursement of expenses.  The Executive will forfeit any Restricted Stock (and
the related Retained Distributions) not vested as of the date of termination. 
For a period of 18 months following the date of termination, the Company will
make available to the Executive and the Executive’s eligible family members, at
the Executive’s sole expense, health insurance continuation coverage pursuant to
Section 4980B of the Code, Sections 601-608 of the Employee Retirement Income
Security Act of 1974, as amended, and under any other applicable law, to the
extent required by such laws (“COBRA Coverage”).

 

(c)                                  Termination by the Company for Cause.  The
Company may terminate this Agreement at any time for Cause upon written notice
to the Executive.  For purposes of this Agreement, “Cause” is (i) the
Executive’s willful, material and irreparable breach of this Agreement; 
(ii) the Executive’s gross negligence in the performance or intentional
nonperformance (continuing for thirty (30) days after receipt of written notice
of need to cure) of any of the Executive’s material duties and responsibilities
under this Agreement;  (iii) the Executive’s willful dishonesty, fraud or
misconduct with respect to the business or affairs of the Company;  or (iv) the
Executive’s conviction of a felony crime.  Upon any termination for Cause, the
Executive will only receive base salary accrued through the date of termination
and reimbursement of expenses and no other compensation or bonus.  The Executive
will forfeit any Restricted Stock (and the related Retained Distributions) not
vested as of the date of termination and any Annual Bonus.  Without limiting the
scope of Section 3(e) above, the Compensation Committee also may deem the
Executive’s termination for Cause as a reason pursuant to Section 3(e) for the
Executive’s forfeiture of all vested shares of Restricted Stock (and any related
Retained Distributions) then Beneficially Owned by the Executive.  For a period
of 18 months following the date of termination, the Company will make COBRA
Coverage available to the Executive and the Executive’s eligible family members,
at the Executive’s sole expense.

 

(d)                                 Termination by the Company Without Cause or
by the Executive for Good Reason.  At any time, either the Executive or the
Company may terminate this Agreement and the Executive’s employment, effective
thirty (30) days after written notice is provided to the other.  If the Company
terminates the Executive’s employment without Cause or if the Executive resigns
employment for Good Reason (as defined below), the Executive will receive from
the Company, subject to Section 5(f) below, (i) any base salary accrued through
the date of termination and reimbursement of expenses, (ii) any earned, but
unpaid, Annual Bonus through the date of termination and at the time otherwise
payable under this Agreement (i.e., after the end of the applicable service
period provided it is earned and on a prorated basis) and reimbursement of
expenses, and (iii) a single, lump sum severance payment equal to one year of
the Executive’s base salary.  If Executive voluntarily resigns, Executive will
receive only the amounts set forth in (i) and (ii) in the preceeding sentence,
on the same terms and conditions stated therein, with no severance payment. If
the Company terminates the Executive’s employment without Cause or if the
Executive resigns employment for Good Reason, the Executive will vest fully in
any Restricted Stock (and the related Retained Distributions) not otherwise
vested as of the date of termination. For a period of 18 months following the
date of termination, the Company will make COBRA Coverage available to the
Executive and the Executive’s eligible family members.  Subject to
Section 5(f) below, the Company will directly pay, or will reimburse the
Executive for, the first one year of premiums for the COBRA Coverage.  However,
if the Executive becomes re-employed with another employer and is eligible to
receive any health insurance benefits under another employer’s plans, the
Company’s obligations to pay or reimburse for medical and dental insurance
benefits under this Section 5(d) shall terminate.  COBRA Coverage extending
beyond the first year after the Executive’s date of termination will be at the
Executive’s sole expense.

 

For purposes of this Agreement, each of the following is a “Good Reason” for the
Executive to terminate employment with the Company:  (i) the Company’s
imposition of material and adverse changes, without the Executive’s consent, in
the Executive’s principal duties (including upon a Change of Control);  (ii) the
Company’s move (including upon a Change of Control) of the Company’s corporate
office (out of which the Executive is based) more than 50 miles from its current
location without the Executive’s consent;  and (iii) the reduction by the
Company (including upon a Change of Control) in the Executive’s base salary
without the Executive’s consent by more than the weighted average percentage
reduction made contemporaneously by the Company of the base salaries all other
executive officers.  Despite the foregoing, if within the 30-day period after
receiving the Executive’s notice of intent to terminate employment on account of
Good Reason, the Company corrects the deficiency giving rise to such notice, a
subsequent resignation by the Executive will not constitute a termination for
Good Reason (without a new event giving rise therefor).

 

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(e)                                  Termination in Connection with a Change of
Control.  Notwithstanding the other provisions of this Section 5, if during the
Term of this Agreement, (x) the Company terminates the Executive’s employment in
anticipation of, in connection with, at the time of or within ninety (90) days
after a Change of Control or (y) the Executive resigns employment with the
Company for Good Reason arising in anticipation of, in connection with, at the
time of or within ninety (90) days after a Change of Control, the Executive will
receive from the Company, subject to Section 5(f) below, (i) any base salary
accrued through the date of termination and reimbursement of expenses, (ii) any
earned, but unpaid, Annual Bonus through the date of termination and at the time
otherwise payable under this Agreement (i.e., after the end of the applicable
service period provided it is earned and on a prorated basis) and reimbursement
of expenses, and (iii) a single, lump sum severance payment equal to one year of
the Executive’s base salary.  Subject to Section 5(f) below, the Executive also
will vest in all then unvested Restricted Stock (and the related Retained
Distributions) to the extent provided by Section 3(c)(ii) above.  For a period
of 18 months following the date of termination, the Company will make COBRA
Coverage available to the Executive and the Executive’s eligible family
members.  Subject to Section 5(f) below, the Company will directly pay, or will
reimburse the Executive for, the first one year of premiums for the COBRA
Coverage.  However, if the Executive becomes re-employed with another employer
and is eligible to receive any health insurance benefits under another
employer’s plans, the Company’s obligations to pay or reimburse for medical and
dental insurance benefits under this Section 5(e) shall terminate.  COBRA
Coverage extending beyond the first year after the Executive’s date of
termination will be at the Executive’s sole expense.

 

(f)                                   Prerequisites to Severance Benefits; 
Timing of Cash Payments.  The Company’s obligations to make cash payments, and
the vesting of Restricted Stock (and the related Retained Distributions), under
this Section 5 are subject to the following:

 

(i)                                     the Executive must execute and deliver
to the Company a release in the form attached as Exhibit A (the “Release”) and
must not revoke it and

 

(ii)                                  the Executive must continuously comply
with the provisions of this Agreement (including the non-competition and
non-solicitation provisions of Section 4 above).

 

The Company will pay the lump sum cash severance amounts under Section 5(d) or
5(e) above on the first day of the month following the Executive’s date of
termination (or, if later, five business days after expiration of any period for
revocation under the Release).

 

6.                                      Tax Withholdings.  The Company may
withhold from any amounts payable under this Agreement such federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.  The Executive may satisfy withholding obligations
relating to the vesting of Restricted Stock by instructing the Company to retain
and cancel a number of shares of Common Stock having a Market Price on the date
of termination (or as of the immediately preceding business day if the date of
termination is not a business day) equal to the withholding tax obligation
amount.  The term “Market Price” with respect to shares of Common Stock means
the closing price on the Nasdaq Stock Market or, if none, the average of the
last reported closing bid and asked prices on any other national or regional
securities exchange or as quoted in the National Association of Securities
Dealers, Inc.’s Automated Quotations System (“Nasdaq”), or if not listed on a
national or regional securities exchange or quoted in Nasdaq, the closing price
as reported by bigcharts.com (or if this service is discontinued, such other
reporting service acceptable to the Company), or if no quotations in such Common
Stock are available, the fair market value of the shares as determined in good
faith by the Board.

 

7.                                      Reduction to Avoid Excise Tax.  If any
payment or distribution to or for the benefit of the Executive (whether paid or
payable or distributed or distributable) pursuant to the terms of this Agreement
or otherwise (a “Payment”) would constitute a “parachute payment” within the
meaning of Section 280G of the Code, the Payment shall be reduced to the extent
necessary so that no portion of the Payment is subject to the excise tax imposed
by Section 4999 of the Code, together with any interest or penalties imposed
with respect to such excise tax, but only if, by reason of such reduction, the
net after-tax benefit to the Executive shall equal or exceed the net after-tax
benefit to the Executive if no reduction was made.  Subject to the next
paragraph, the Company shall afford the Executive an opportunity to select a
reduction of cash or non-cash items, or a combination of both, to reduce the
excess Payment.

 

All determinations required to be made under this Section 7, including whether a
reduction of any Payment is required and the assumptions to be utilized in
arriving at such determination, shall be made by the Company’s independent
registered public accountants serving immediately prior to the Change in
Control, or such other nationally recognized accounting firm as may be agreed by
the Company and the Executive (the “Accounting Firm”);  provided, that the
Accounting Firm’s determination shall be made based upon “substantial authority”
within the meaning of Section 6662 of the Code.  Any determination by the
Accounting Firm hereunder shall be binding upon the Company and the Executive.

 

8.                                      Return of Company Property.  All
records, designs, trade names and trademarks, service names and service marks,
patents, business plans, financial statements, manuals, memoranda, customer and
other lists and other property delivered to or compiled by the Executive by or
on behalf of the Company, or its representatives, vendors or customers which
pertain to the business of the Company

 

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are and will remain the property of the Company, and be subject at all times to
its discretion and control.  Likewise, all correspondence, reports, records,
charts, advertising and marketing materials and other similar data pertaining to
the business, activities or future plans of the Company which is collected by or
in the possession of the Executive shall be delivered promptly to the Company
without request by it upon termination of the Executive’s employment.  Further,
upon any termination of employment, the Executive shall return any Company
computer (without deleting or tampering with information thereon) and any other
physical property of the Company.

 

9.                                      Inventions.  The Executive will disclose
promptly to the Company any and all significant conceptions and ideas for
inventions, improvements and valuable discoveries, whether patentable or not,
which are conceived or made by the Executive, solely or jointly with another,
during the period of employment, and which are directly related to the business
or activities of the Company and which the Executive conceives as a result of
the Executive’s employment by the Company.  The Executive hereby assigns and
agrees to assign all of the Executive’s interests therein to the Company or its
nominee.  Whenever requested to do so by the Company, the Executive will execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain letters patent of the United States
or any foreign country or to otherwise protect the Company’s interest therein. 
Nothing in this Agreement shall apply to an invention for which no equipment,
supplies, facility or trade secret information of the Company was used and which
was developed entirely on the Executive’s own time and (i) which does not relate
(a) directly to the business of the Company or (b) to the Company’s actual or
demonstrably anticipated research or development or (ii) which does not result
from any work performed by the Executive for the Company.

 

10.                               Confidentiality.  In consideration of this
Agreement, the Executive agrees to not at any time use or, other than as
required by court order, disclose, or permit use or disclosure of, any of the
Company’s confidential information or trade secrets.  This includes all
knowledge and information that Executive acquires during employment with the
Company which relates to the business, developments, activities, products and
services or financial affairs of the Company or any individual or firm that is
engaged in or has done business with the Company.  This also includes any
information or compilation of information that derives independent economic
value from not being generally known or readily ascertainable by proper means by
other persons and which relates to any aspect of the Company’s business,
including, but not limited to:  trade secrets within the meaning of the
Minnesota Trade Secrets Act, customer lists, customer information, costs and
selling prices, payment and credit information, customer profiles and analysis,
prospect tracking recording, financial information, budget and financial plans,
costing, pricing, billing information, tax data, sales and marketing
information, business strategies and plans, technical information including
software, research, product/product development information, personnel
information such as salaries, phone numbers, titles, benefits, bonuses,
employment histories, shareholder information and stock data and any
discoveries, inventions, ideas, methods, products, equipment, developments,
improvements or programs which the Company holds confidential and has not
publicly disclosed.  Despite the above, the Executive is not obliged to maintain
the confidentiality of information that is or becomes public other than as a
result of acts by or through the Executive or that the Executive independently
obtains from a third party having no duty of confidentiality to the Company.

 

11.                               Indemnification;  Directors’ and Officers’
Insurance.  The Executive shall have the benefit of indemnification to the
fullest extent permitted by applicable law, which indemnification shall continue
after the termination of this Agreement for such period as may be necessary to
continue to indemnify Executive for acts or omissions during the Term hereof to
the fullest extent permitted by applicable law.

 

12.                               Code Section 409A.  To the extent applicable
and notwithstanding any other provision of this Agreement, this Agreement and
the Restricted Stock and other payments and benefits hereunder shall be
administered, operated and interpreted in accordance with Code Section 409A and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the date of this Agreement;  provided, however, in the
event that the Compensation Committee determines that any amounts payable
hereunder may be taxable to the Executive under Code Section 409A and related
Department of Treasury guidance prior to the payment and/or delivery to the
Executive of such amount, the Company may (a) adopt such amendments to this
Agreement and the related Restricted Stock or other payments and benefits
hereunder, and appropriate policies and procedures, including amendments and
policies with retroactive effect, that the Compensation Committee determines
necessary or appropriate to preserve the intended tax treatment of the benefits
provided by this Agreement and/or (b) take such other actions as the
Compensation Committee determines necessary or appropriate to comply with or
exempt this Agreement and the Restricted Stock and other payments and benefits
hereunder from the requirements of Code Section 409A and related Department of
Treasury guidance, including such Department of Treasury guidance and other
interpretive materials as may be issued after the date of this Agreement.  The
Company makes no guarantees to the Executive regarding the tax treatment of this
Agreement and, notwithstanding the above provisions and any agreement or
understanding to the contrary, if any stock, payments or other amounts due to
the Executive (or his beneficiaries, as applicable) results in, or causes in any
manner, the application of an accelerated or additional tax, fine or penalty
under Code Section 409A or otherwise to be imposed, then the Executive (or his
beneficiaries, as applicable) shall be solely liable for the payment of, and the
Company shall have no obligation or liability to pay or reimburse (either
directly or otherwise) the Executive (or his beneficiaries, as applicable) for,
any such additional taxes, fines or penalties.

 

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13.                               Complete Agreement.  This Agreement supersedes
any other agreements or understandings, written or oral, between the Company and
the Executive, and the Executive has no oral representations, understandings or
agreements with the Company or any of its officers, directors, employees or
representatives covering the same subject matter as this Agreement.  This
document is the final, complete and exclusive statement and expression of the
agreement between the Company and the Executive and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements.  This document may not
be later modified except by a written instrument signed by a duly authorized
officer of the Company and the Executive, and no term of this Agreement may be
waived except by a written instrument signed by the party waiving the benefit of
such term.

 

14.                               Notice.  Whenever any notice is required
hereunder, it shall be given in writing addressed as follows:

 

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To the Company:

 

Datalink Corporation

 

 

8170 Upland Circle

 

 

Chanhassen, Minnesota 55317

 

 

Attention: Paul F. Lidsky, President and Chief Executive Officer

 

 

 

To the Executive:

 

Karen Clary

 

 

2454 Riverbend Road

 

 

Lower Macungie, PA 18103

 

Notice is given and effective three (3) days after the deposit in the U.S. mail
of a writing addressed as above and sent first class mail, certified, return
receipt requested, or when actually received.  Either party may change the
address for notice by notifying the other party of such change in accordance
with this Section 13.

 

15.                               Arbitration.  Except as to matters of
injunctive or equitable relief (over which the parties agree that the federal
and state courts located in Minneapolis, Minnesota will have exclusive
jurisdiction and are deemed to be of proper venue and convenience to the
parties), any unresolved dispute or controversy arising under or in connection
with this Agreement will be settled exclusively by arbitration, conducted before
a panel of three (3) arbitrators in Minneapolis, Minnesota, in accordance with
the rules of the American Arbitration Association then in effect.  The
arbitrators will not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party.  A decision
by a majority of the arbitration panel will be final and binding.  Judgment may
be entered on the arbitrators’ award in any court having jurisdiction.  The
direct expense of any arbitration proceedings, including, but not limited to,
the administrative fees and the arbitrators’ fees and expenses, will be borne by
the Company.

 

16.                               Binding Effect;  Governing Law.  This
Agreement will inure to the benefit of the successors or assigns of the
Company.  This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota, exclusive of its conflicts of laws rules.

 

IN WITNESS WHEREOF, the undersigned have hereunto affixed their signatures.

 

DATALINK CORPORATION

EXECUTIVE

 

 

 

 

 

 

 

By

/s/ Paul F. Lidsky

 

/s/ Karen Clary

 

 

Paul F. Lidsky, President and Chief

 

Karen Clary

 

 

Executive Officer

 

 

 

 

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Exhibit A

 

Release of Claims

 

I release Datalink Corporation and its officers, directors, employees and agents
from any claim, cause of action, damages or expenses, including attorneys’ fees,
arising out of the relationship between the parties through the signing of this
Release.  This is intended to be a complete release of claims by me, whether the
claims are known or unknown, matured or unmatured or fixed or contingent.
 Therefore, by this release I GIVE UP ANY RIGHT TO MAKE A CLAIM, BRING A
LAWSUIT, FILE AN ADMINISTRATIVE CHARGE OF DISCRIMINATION OR OTHERWISE SEEK MONEY
DAMAGES OR COURT ORDERS AS A RESULT OF MY EMPLOYMENT BY DATALINK, OR OF MY
SEPARATION FROM EMPLOYMENT WITH DATALINK.  I acknowledge and intend that this
Release cover claims of wrongful termination, defamation, intentional infliction
of emotional distress, any claims under the Federal Age Discrimination in
Employment Act, Title VII of the Civil Rights Act of 1964, the Americans With
Disabilities Act, the Minnesota Human Rights Act and Minnesota Statute
Section 181.81 (which prohibits age discrimination) and any other state or
federal statutes prohibiting discrimination in employment.  This Release also
binds my heirs, administrators, representatives, executors, successors and
assigns.  I have been advised by my legal counsel of the effect of this
Release.  Despite the above, this Release does not apply to claims against
Datalink for breaching its obligations under an Employment Agreement dated
January 16, 2012.

 

NOTICE TO THE UNDERSIGNED:

 

THIS IS A RELEASE OF LEGAL RIGHTS YOU MAY HAVE.  YOU SHOULD CONSULT WITH AN
ATTORNEY REGARDING THIS RELEASE AND OTHER ASPECTS OF THIS LETTER BEFORE YOU SIGN
IT.

 

YOU HAVE 21 DAYS TO CONSIDER WHETHER OR NOT TO SIGN THIS RELEASE, STARTING FROM
THE DATE YOU FIRST RECEIVE A COPY OF IT.  YOU MAY SIGN THIS RELEASE AT ANY TIME
DURING THE 21-DAY PERIOD.

 

YOUR EMPLOYMENT BY DATALINK HAS TERMINATED.  YOUR ACCEPTANCE OR FAILURE TO
ACCEPT THIS RELEASE DOES NOT AFFECT YOUR TERMINATION.  IF YOU DO NOT ACCEPT THIS
RELEASE, OR IF YOU REVOKE YOUR ACCEPTANCE OF IT, DATALINK WILL NOT PROVIDE YOU
THE SEVERANCE PAY AND OTHER BENEFITS DESCRIBED IN YOUR EMPLOYMENT AGREEMENT.

 

AFTER YOU ACCEPT THIS RELEASE BY SIGNING IT, YOU MAY REVOKE YOUR ACCEPTANCE FOR
A PERIOD OF 15 DAYS AFTER THE DATE YOU SIGN.  THIS RELEASE IS NOT EFFECTIVE
UNTIL THIS 15-DAY REVOCATION PERIOD EXPIRES.

 

IF YOU WISH TO REVOKE YOUR ACCEPTANCE OF THIS RELEASE, YOU MUST NOTIFY DATALINK
IN WRITING WITHIN THE 15-DAY REVOCATION PERIOD.  YOU MUST DELIVER YOUR NOTICE TO
DATALINK IN PERSON OR BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED
TO:  Paul F. Lidsky, President and Chief Executive Officer, Datalink
Corporation, 8170 Upland Circle, Chanhassen, Minnesota 55317.

 

IF YOU FAIL TO PROPERLY DELIVER OR MAIL YOUR WRITTEN REVOCATION AS INSTRUCTED,
YOUR REVOCATION WILL NOT BE EFFECTIVE.

 

Date this Release is first given by Datalink to the undersigned:

 

 

 

Agreed to and accepted by the undersigned:

 

 

 

Date this Release is signed by the undersigned:

 

 

 

 

 

 

Employee

 

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