EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

(Conformed Copy — Includes all amendments through January 17, 2011)

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into by and
between Datalink Corporation, a Minnesota corporation (the “Company”), and Paul
F. Lidsky (the “Executive”) effective as of the 20th day of July, 2009.

 

R E C I T A L S :

 

WHEREAS, the Company is a leading provider of data storage products and
solutions;  and

 

WHEREAS, the Company and the Executive desire to set forth in this Agreement the
terms under which Executive will serve as President and Chief Executive Officer
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
President and Chief Executive Officer 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
Board of Directors (the “Board”) and its committees.  Except for an interim
period ending not later than August 20, 2009 (during which period the Executive
will expeditiously arrange termination of employment with his current employer),
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
and its committees.

 

Except for the interim period described above, 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.

 

The Executive will continue as a member of the Board after the date of this
Agreement.   However, unless a majority of the Board otherwise determines, in
the event of (and effective coincident with) any termination of the Executive’s
employment with the Company for any reason at any time, the Executive’s service
as a member of the Board will automatically

 

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terminate.  The Executive hereby resigns as a member of the Board’s audit and
compensation committees.

 

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 (the “Base Salary”) shall be $325,000 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)           Bonuses.  During the Term, 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 amount of the Annual
Bonus, the relevant Performance Milestones for each year and the payment
arrangements will be set from time to time by the Compensation Committee. 
Unless the Compensation Committee otherwise determines, 75% of the Annual Bonus
will relate to achievement of financial milestones and 25% will relate to
business milestones.  The Compensation Committee will have complete discretion
to determine the Executive’s level of achievement toward the Performance
Milestones.  Unless the Compensation Committee otherwise determines, the
percentage of the Executive’s Base Salary payable as an Annual Bonus for
achievement of 100% of both the financial and business Performance Milestones
(the “Target Bonus”) will be 80%.  To the extent that the Compensation Committee
determines that the Executive has achieved less or greater than 100% of the
relevant Performance Milestones, and unless the Compensation Committee otherwise
determines, the percentage of the Target Bonus payable will be as follows:

 

Attainment

 

Payout

 

80%

 

20

%

85%

 

40

%

90%

 

60

%

95%

 

80

%

100%

 

100

%

101 – 150%

 

Linear

 

Capped at 150%

 

 

 

 

For 2009 only, the Executive’s Annual Bonus will be $130,000, conditioned on the
Executive’s continuous employment with the Company through December 31, 2009. 
This Annual Bonus amount is payable not later than March 15, 2010.

 

(c)           Executive Perquisites, Benefits and Other Compensation. 
Commencing on the date hereof, the Executive shall be entitled to receive
additional benefits and compensation

 

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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:

 

(i)            A car allowance and reimbursement for use of a corporate cell
phone, all in accordance with Company policy for similarly situated executive
officers.

 

(ii)           Reimbursement for all business travel 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 Stock Options.  In further consideration of this
Agreement, the Company hereby awards to the Executive the option to purchase a
total of 450,000 shares of common stock, par value $.001 per share, of the
Company (the “Common Stock”), subject to the adjustment and the conditions and
restrictions set forth below (the “Stock Option”).  The Stock Option is granted
pursuant to the Company’s 2009 Incentive Compensation Plan but is not intended
to qualify as an incentive option under Section 422 of the Internal Revenue
Code, as amended.  The Executive may exercise the Stock Option, in whole or in
part, at a purchase price (the “Exercise Price”) of $3.50 per share (the closing
price of the Company’s Common Stock on the Nasdaq Stock Market on the date of
this Agreement), subject to adjustment as provided below and in compliance with
Section 5(f) below, at any time within ten (10) years from the date of this
Agreement (subject to the limitations below), but only to the extent that the
Executive is vested in the Stock Option.

 

(a)           Vesting.  The Executive will vest in 25% of the Stock Option on
the first, second, third and fourth anniversaries hereof;  provided, that the
Executive must be employed with the Company continuously to each such vesting
date in order to vest in the portion of the Stock Option on such date.  However,
subject to Section 5(f) below, all of the Stock Option will vest sooner 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, (ii) the Change of
Control Price (as defined below) exceeds $3.50 (the closing price of the
Company’s Common Stock on the Nasdaq Stock Market on the date of this Agreement)
and (iii) such acceleration and vesting will not cause the Stock Option to be
subject to the adverse consequences described in Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”).  Any portion of the Stock Option
that does not vest prior to the Executive’s termination of employment for any
reason at any time will lapse and automatically be canceled.  Further, any
vested portion of the Stock Option not exercised by the Executive within ninety
(90) days after any termination of employment for any reason at any time (12
months, if Executive dies during the Term hereof and the Stock Option is being
exercised by the Executive’s estate) will lapse and automatically be canceled.

 

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

 

(i)            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

 

(ii)           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 (A) 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 (B) 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

 

(iii)          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 (A) 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)

 

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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, (B) 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 (C) 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

 

(iv)          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.

 

(c)           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
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

 

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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)           Adjustments to Number of Shares and Exercise Price.  In the event
that the Compensation Committee determines that any dividend or other
distribution (whether in the form of cash, shares or other securities or
property), stock split or combination, forward or reverse merger,
reorganization, subdivision, consolidation or reduction of capital,
recapitalization, consolidation, scheme of arrangement, split-up, spin-off or
combination involving the Company or repurchase or exchange of shares, issuance
of warrants or other rights to purchase shares or other securities of the
Company, or other similar corporate transaction or event affects the Stock
Option or the shares of Common Stock underlying it such that an adjustment is
determined by the Compensation Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Stock Option, then the Compensation Committee shall, in
such manner as it may deem equitable, adjust any or all of (i) the number and
type of shares (or other securities or property) subject to the Stock Option or
(ii) the Exercise Price with respect to the Stock Option;  provided that the
number of shares subject to the Stock Option shall always be a whole number. 
Notwithstanding the foregoing, any adjustments made pursuant to this
Section 3(d) shall be made in such a manner as to ensure that after such
adjustment, the Stock Option continues not to be deferred compensation subject
to Code Section 409A (or if the Stock Option is already subject to Code
Section 409A, so as not to give rise to liability under Code Section 409A).

 

(e)           Non-Alienation of Benefits.  Other than pursuant to a qualified
domestic relations order or by the Executive’s will upon his death, 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.

 

(f)            Subscription Representations;  Transfer Restrictions.  The
Executive understands that the Stock Option constitutes, and any shares of
Common Stock acquired upon exercise thereof will constitute, “restricted
securities” within the meaning of the Securities Act of 1933, as amended (the
“Securities Act”).  Accordingly, even if the Executive is fully vested in the
Stock Option, 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 underlying Common 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.

 

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(g)           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 Stock Option and any shares acquired upon
exercise thereof) 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 shares acquired upon exercise of the Stock
Option) beneficially owned by the Executive, unless the purchaser or recipient
agrees in writing to be bound by the foregoing lock-up agreement.

 

(h)           Stock Certificate Restrictions.  The Executive acknowledges that
the Company will place a restrictive legend on any certificate representing
shares of Common Stock acquired upon exercise of the Stock Option, 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.

 

(i)            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.

 

4.             Non-Competition and Non-Solicitation.

 

(a)           Basic Terms.  In consideration of this Agreement (including the
Stock Option 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;

 

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(iii)          solicit, divert or take away, or attempt to solicit, divert or to
take away, the 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

 

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“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 (at the
time otherwise payable under this Agreement) through the date of termination and
reimbursement of expenses.  The Executive’s estate will forfeit any portion of
the Stock Option 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
(at the time otherwise payable under this Agreement) through the date of
termination and reimbursement of expenses.  The Executive will forfeit any
portion of the Stock Option 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 receive no severance
compensation other than base salary accrued through the date of termination and
reimbursement of expenses.  The Executive will forfeit any

 

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portion of the Stock Option not 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, 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 (at the time otherwise payable under this Agreement) through the date of
termination and (iii) a single, lump sum payment equal to 1.5 times the
Executive’s annual Base Salary.  The Executive will forfeit any portion of the
Stock Option not 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 18 months 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.

 

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 its principal executive
offices 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, the resignation by the Executive will
not constitute a termination for Good Reason (without a new event giving rise
therefor).

 

(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 (at the time otherwise

 

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payable under this Agreement) through the date of termination and (iii) a
single, lump sum payment equal to 1.5 times the Executive’s annual Base Salary. 
The Executive will vest in his Stock Option to the extent provided for by
Section 3(a) 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 18 months 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.

 

(f)            Prerequisites to Severance Benefits;  Timing of Cash Payments. 
The Company’s obligations to make cash payments under Section 5, and the
exercisability of the Stock Option after any termination of the Executive’s
employment at any time for any reason, 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

 

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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, tradenames 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 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

 

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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 Stock Option 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 Stock
Option or other payments and benefits hereunder, and appropriate policies and
procedures, including amendments and policies with retroactive effect, that the
Compensation Committee

 

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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 Stock Option 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.

 

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:

 

To the Company:

Datalink Corporation

 

8170 Upland Circle

 

Chanhassen, Minnesota 55317

 

Attention: Greg R. Meland, Chairman

 

 

To the Executive:

Paul F. Lidsky

 

18715 – 24th Avenue North

 

Plymouth, Minnesota 55447

 

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 14.

 

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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/ Greg R. Meland

 

/s/ Paul F. Lidsky

 

Greg R. Meland, Chairman

 

Paul F. Lidsky

 

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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 July 20, 2009.

 

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

 

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MUST DELIVER YOUR NOTICE TO DATALINK IN PERSON OR BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO:  Greg R. Meland, Chairman, 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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