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Exhibit 10.78    
  


 
 

EMPLOYMENT AGREEMENT
  (Michael S. Rupe)    
  


        This Employment Agreement (the "Agreement") by and between SOURCECORP, Incorporated, a Delaware corporation, and  SOURCECORP Management, L.P., a Texas limited partnership and indirect wholly owned subsidiary of  SOURCECORP, Incorporated (collectively, the "Company"), and Michael S.
Rupe ("Employee") is hereby entered into on February 7, 2003. This
Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. 


 
 

R E C I T A L S    
  


        The following statements are true and correct: 


        As
of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions. 


        Employee
is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar
with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company.
In consideration for Employee's promises herein, the Company agrees to provide Employee with such confidential information; in return, Employee recognizes and acknowledges that such information must
be maintained in confidence, and to further such protection agrees to the provisions of Section 3 of this Agreement. 



        Therefore,
in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: 


 
 

A G R E E M E N T S    
  


        1.    Employment and Duties.    


        (a)  The
Company hereby employs Employee as a Division President and/or strategic business unit leader, with the makeup of such divisions or business units as determined by
the Company from time to time. Employee shall have such duties, responsibilities and authority as determined or designated from time to time by the Company and will report directly to the Company's
Chief Operating Officer or such other officer or employee designated by the Company. Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to
Section 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company. 


        (b)  Employee
shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except
to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate Section 3 hereof. The foregoing limitations
shall not be construed as prohibiting Employee from (A) serving on the boards of directors of other companies, provided that the Company is notified of, and consents to, such potential
directorship prior to acceptance, the Company and Employee concur that acting as such a director is not likely to create an actual or apparent conflict of interest and so long as no actual or apparent
conflict of interest arises that is not promptly cured or (B) making personal investments in such form or manner as will neither require his services, other than to a 


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minimal extent, in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of Section 3 hereof. 


        2.    Compensation.    For all services rendered by Employee, the Company shall compensate Employee as follows: 


        (a)  Base Salary. The base salary payable to Employee shall be $275,000 per year (effective January 1, 2003), payable
on a regular basis in accordance with the Company's standard payroll procedures, but not less than on a bi-weekly basis. 



        (b)  Incentive Bonus Plan. It is the Company's intent to develop a written Incentive Bonus Plan setting forth the criteria
under which Employee will be eligible to receive a year-end bonus. Employee's maximum bonus opportunity shall be up to 75% of his annual base salary. The bonus payment and Employee's
targeted performance shall be determined by, and be subject to the approval of, the Board or the compensation committee thereof. 


        (c)  Executive Perquisites, Benefits and Other Compensation. Employee shall be entitled to receive additional benefits from
the Company in such form and to such extent as determined by the Company. Such benefits shall be established concurrently with the execution of this Agreement and shall remain in place during the term
of this Agreement, unless otherwise agreed to in writing by the Company and Employee. 


        3.    Non-Competition Agreement.    


        (a)  Subject
to Sections 5(d) and (e) and Section 12, Employee will not, during the period of his employment by or with the Company, and for a Period (defined
below) immediately following the termination of his employment with the Company, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person,
company, partnership, corporation, business or entity 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, in any business selling any products or services in direct competition with the Company, within 100 miles of (A) the principal executive offices of the
Company or (B) any place to which the Company provides products or services or in which the Company (including the subsidiaries thereof) is in the process of initiating business operations
during the term of this covenant (the "Territory"); 


        (ii)  call
upon, hire, attempt to hire, contact or solicit with respect to hiring (for Employee or on behalf of another) any person who is, at that time, or who has been
within one (1) year prior to that time, an employee of the Company (including the subsidiaries thereof) in a managerial or sales capacity, provided that Employee shall be permitted to call upon
and hire any member of his immediate family; 


        (iii)  call
upon, solicit, divert or take away or attempt to call upon, solicit, divert or take away any person or entity that is, at that time, or that has been, within one
(1) year prior to that time, a customer of the Company (including the subsidiaries thereof) for the purpose of soliciting or selling products or services in direct competition with the Company; 


        (iv)  call
upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, which candidate was either called upon by the Company
(including the subsidiaries thereof) or for which the Company made an acquisition analysis, for the purpose of acquiring such entity; or 



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        (v)  disclose
customers, whether in existence or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever. 




        As
used in Section 3(a), "Period" shall mean one (1) year for Section 3(a)(i) and shall mean two (2) years for Section 3(a)(ii)-(v). As used in
Section 3(a), references to the business, customers, Territory, etc. of the Company refer to the status of the Company prior to any Change in Control
(i.e., such breadth of business, customers, Territory, etc. shall not automatically be expanded to include those of a successor to the Company resulting
from a Change in Control). Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an 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)  Because
of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenant, and because of the immediate and irreparable
damage that could be caused to the Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by the Company in the event of breach by him by
injunctions and restraining orders without the necessity of posting any bond therefor. 


        (c)  In
the course of Employee's employment with the Company, Employee will become exposed to certain of the Company's confidential information and business relationships,
which the above covenants are designed to protect. It is agreed by the parties that the foregoing covenants in this Section 3 impose a reasonable restraint on Employee in light of the
activities and business of the Company (including the Company's subsidiaries) on the date of the execution of this Agreement and the current plans of the Company (including the Company's
subsidiaries); but it is also the intent of the Company and Employee that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company
(including the Company's subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of Employee, subject to the following paragraph. For
example, if, during the Term of this Agreement, the Company (including the Company's subsidiaries) engages in new and different activities, enters a new business or established new locations for its
current activities or business in addition to or other than the activities or business enumerated under the Recitals above or the locations currently established therefor, then Employee will be
precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business within 100 miles of its
then-established operating location(s) through the term of this covenant. 


        It
is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in
competition with the Company (including the Company's subsidiaries), or similar activities or business in locations the operation of which, under such circumstances, does not violate
clause (a)(i) of this Section 3, and in any event such new business, activities or location are not in violation of this Section 3 or of Employee's obligations under this
Section 3, if any, Employee shall not be chargeable with a violation of this Section 3 solely because the Company (including the Company's subsidiaries) shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable. 


        (d)  The
covenants in this Section 3 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 shall determine 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 that the court deems reasonable, and the Agreement shall thereby be reformed to such extent. 


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        (e)  All
of the covenants in this Section 3 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 Employee 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 following Employee's employment set forth at the beginning of this Section 3, during which the agreements and covenants of Employee made in this
Section 3 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this Section 3. 


        4.    Place of Performance.    Employee's place of employment is the Company's headquarters in Dallas, Texas, unless
otherwise agreed to in writing by the Company. Employee understands that he may be requested by the Board to relocate from his present residence to another geographic location in order to more
efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities. In the event the Company determines that such a
relocation would significantly benefit the Company, Employee shall agree to make any such relocation (provided that Employee's obligation to relocate shall terminate in the event of a Change in
Control). In the event of such a relocation, the Company will pay all reasonable relocation costs to move Employee, his immediate family and their personal property and effects. Such costs may
include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to
moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location;
and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes. The general intent of the foregoing is
that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best efforts to incur only those
costs that are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his
family. 


        5.    Term; Termination; Rights on Termination.    The term of this Agreement shall begin on the date hereof and
continue through December 31, 2003 (the "Term"). Any renewal or extension of this Agreement must be in writing, signed by both parties hereto (except to the extent that such renewal is an
automatic renewal contemplated by Section 12(b), in which case no writing shall be required). This Agreement and/or Employee's employment may be terminated earlier in any one of the following
ways: 



        (a)  Death. The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's
estate. 


        (b)  Disability. If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent
from his full-time duties hereunder for four (4) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of
such four (4) month period, but which shall not be effective earlier than the last day of such four (4) month period), the Company may terminate Employee's employment hereunder provided
Employee is unable to resume his full-time duties at the conclusion of such notice period. Also, Employee may terminate his employment hereunder if his health should become impaired to an
extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that Employee shall have furnished the Company with a written
statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit
to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor. In the
event this Agreement is terminated as a result of Employee's disability, Employee 



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shall receive from the Company, in a lump sum payment due within ten (10) days of the effective date of termination, an amount equal to twelve times Employee's then monthly base salary. 



        (c)  Good Cause. The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause,
which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of same) of any of Employee's material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud, or misconduct with respect to
the business or affairs of the Company that materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation. 


        (d)  Without Cause. At any time after the commencement of employment, the Company may, without cause, terminate this Agreement
and Employee's employment, effective thirty (30) days after written notice is provided to the Employee. Should Employee be terminated by the Company without cause, Employee shall receive from
the Company, on or before the effective date of termination, a standard Company executive separation agreement providing for a gross lump-sum severance payment ("Severance Pay") equal to
six times Employee's then monthly base salary (or such greater amount at
the Company's sole discretion). Further, any termination without cause by the Company shall operate to shorten the Period applicable to Section 3(a)(i) to six (6) months or the
remaining Term, whichever is longer, from the date of termination of employment (with the Period for the provisions of Section 3(a)(ii)-(v) remaining unchanged (i.e. two
(2) years)). In the event Employee is terminated without cause within six months following the expiration of the Term and this Agreement has neither been renewed nor replaced with another
employment agreement, Employee shall receive from the Company, on or before the effective date of termination, a standard Company executive separation agreement providing for a gross
lump-sum severance payment equal to six times Employee's then monthly base salary (or such greater amount at the Company's sole discretion). 



        (e)  Termination by Employee for Good Reason. Employee may terminate his employment hereunder for "Good Reason." As used
herein, "Good Reason" shall mean the continuance or failure to cure any material breach of this Agreement by the Company after fifteen (15) days' prior written notice by Employee to the
Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement. In the event of any dispute with respect to the termination by the Employee for Good Reason, such
dispute shall be resolved pursuant to the provisions of Section 13 below. Should Employee terminate Employee's employment for Good Reason, Employee shall receive from the Company, in a
lump-sum payment due on the effective date of termination, the lesser of (1) an amount equal to six times Employee's then monthly base salary or (2) the then base salary for
whatever time period is remaining under the Term of this Agreement. Further, in the event this Agreement is terminated by Employee for Good Reason, the Period applicable to
Section 3(a)(i) shall be shortened to six (6) months or the remaining Term, whichever is longer (with the Period for the provisions of Section 3(a)(ii)-
(v) remaining unchanged (i.e. two (2) years)). 


        (f)    Termination by Employee Without Good Reason. If Employee resigns or otherwise terminates his employment without Good
Reason pursuant to Section 5(f), Employee shall receive no severance compensation. 


        (g)  Change of Control. Refer to Section 12, below. 




Upon
termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and
reimbursements due through the effective date of termination. Additional compensation subsequent to 


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such a termination of this Agreement, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in Section 13. Except as otherwise provided
in this Section, all other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination of this Agreement; however, the Company's
obligations under Section 5 and Section 9 herein and Employee's obligations under Sections 3, 6, 7, 8, 9 and 10 herein shall survive such termination in accordance with their
terms. 


        6.    Return of Company Property.    All records, designs, patents, business plans, financial statements, manuals,
memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company's subsidiaries) or its representatives, vendors or customers that pertain
to the business of the Company (including the Company's subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company's subsidiaries) that
is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment. 



        7.    Inventions.    Employee shall disclose promptly to the Company any and all significant conceptions and ideas for
inventions, improvements and valuable discoveries, whether patentable or not, that are conceived or made by Employee, solely or jointly with another, during the period of employment or within one
(1) year thereafter, and that are directly related to the business or activities of the Company (including the Company's subsidiaries) and that Employee conceives as a result of his employment
by the Company. Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall 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. 


        8.    Trade Secrets.    Employee agrees that he will not, during or after the term of this Agreement with the Company,
disclose the specific terms of the Company's (including the Company's subsidiaries) relationships or agreements with its significant vendors or customers or any other significant and material trade
secret of the Company (including the Company's subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever, except
as is disclosed in the ordinary course of business. 


        9.    Indemnification.    In the event Employee is made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative (other than an action by or with the Company against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred
by Employee in connection therewith, except as prohibited by law or as against public policy. In the event that both Employee and the Company are made a party to the same third-party action,
complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall
have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel. Further,
while Employee is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence and misconduct or performed criminal and fraudulent acts that materially damage the business of the Company. 


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        10.    No Prior Agreements.    Employee hereby represents and warrants to the Company that the execution of this
Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party
may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third
party that was in existence as of the date of this Agreement. 


        11.    Assignment; Binding Effect.    Employee understands that he has been selected for employment by the Company on
the basis of his personal qualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement and the Company agrees not to
assign all or any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control). Subject to the preceding two (2) sentences and the express
provisions of Section 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives,
successors and assigns. 


        12.    Change in Control.    


        (a)  Employee
understands and acknowledges that the Company may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the
rights and obligations of the Company hereunder. 


        (b)  In
the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated
closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the
closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control
shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be 1.15 times the sum of Employee's annual
salary plus maximum annual bonus opportunity immediately prior to the Change in Control and the Period applicable to Section 3(a)(i) shall be reduced to six (6) months or the
remaining Term, whichever is longer (with the Period for the provisions of Section 3(a)(ii)-(v) remaining unchanged (i.e. two (2) years)). Payment shall be made at the closing of
the transaction. In the event of a Change in Control, the Term shall be automatically extended to one year following such Change in Control. Further, in the event of a Change in Control, the severance
compensation Employee would thereafter (during the remainder of the Term) be entitled as a result of a termination of employment by the Company without cause (Section 5(d)), or by Employee for
Good Reason (Section 5(e)) shall be 1.15 times the sum of Employee's annual salary plus maximum annual bonus opportunity immediately prior to the Change in Control and the Period applicable to
Section 3(a)(i) shall be reduced to six (6) months or the remaining Term, whichever is longer (with the Period for the provisions of Section 3(a)(ii)-(v) remaining
unchanged (i.e. two (2) years)). Further, in the event of a Change in Control, a reduction in annual salary or maximum annual bonus opportunity following such Change in Control (during the
remainder of the Term) shall be additional grounds for Employee to terminate this Agreement for "Good Reason." 


        (c)  For
purposes of applying Section 5 under the circumstances described in the first sentence of Section 12(b) above, the effective date of termination will
be the closing date of the transaction giving rise to the Change in Control, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at
such time. Further, Employee will be given sufficient time in order to comply with then Securities and Exchange Commission's regulations to elect whether to exercise and sell all or any of his vested
options to purchase Common Stock of the Company, 


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including any options with accelerated vesting under the provisions of the Company's stock option plan, as amended (and as modified by the related option agreement/certificate in accordance with such
Plan) or any warrants, such that he may convert such options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if
he so desires. 


        (c)  A
"Change in Control" shall be deemed to have occurred if: 



        (i)    any
person, other than the Company or an employee benefit plan of the Company, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company and immediately after such acquisition such Person is, directly or indirectly, the
Beneficial Owner of voting securities representing 30% or more of the total voting power of all of the then-outstanding voting securities of the Company; 



        (ii)  the
individuals (A) who, as of the closing date of the Company's initial public offering, constitute the Board of Directors of the Company (the "Original
Directors") or (B) who thereafter are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their
election) or (C) who are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at
least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors"
immediately following their election), cease for any reason to constitute a majority of the members of the Board of Directors of the Company; 


        (iii)  the
consummation of a merger, consolidation, recapitalization, or reorganization of the Company, a reverse stock split of outstanding voting securities of the Company,
or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by
the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by holders of at least 75% of the outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or 


        (iv)  the
consummation of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the
Company's assets (i.e., 50% or more of the total assets of the Company). 




        (d)  If
any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the
Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate "Total Payments") would be subject to the excise tax imposed by
Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then Employee shall be entitled to receive from the Company an additional payment (the "Gross-up
Payment") in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments
and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments. 


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        For
purposes of this Section Employee's applicable Federal, state and local taxes shall be computed at the maximum marginal rates, taking into account the effect of any loss of personal
exemptions resulting from receipt of the Gross-Up Payment. 


        All
determinations required to be made under this Section 12, including whether a Gross-Up Payment is required under this Section, and the assumptions to be used in
determining the Gross-Up Payment, shall be made by the Company's current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in
Control (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there
will likely be a Change in Control, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in
Control or is otherwise unavailable, Employee (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may
collectively select a single accounting firm) may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm with respect to such determinations described above shall be borne solely by the Company. 



        Employee
agrees (unless requested otherwise by the Company) to use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Employee
owes an amount of Excise Tax greater than the amount determined pursuant to this Section; provided, that Employee shall be entitled to reimbursement by
the Company (on an after tax basis) of all fees and expenses reasonably incurred by Employee in contesting such determination. In the event the Internal Revenue Service or any court of competent
jurisdiction determines that Employee owes an amount of
Excise Tax that is greater than the amount previously taken into account and paid under this Agreement (such additional Excise Tax being the "Additional Excise Tax"), the Company shall promptly pay to
Employee the amount of such shortfall. In the case of any payment that the Company is required to make to Employee pursuant to the preceding sentence (a "Later Payment"), the Company shall also pay to
Employee an additional amount such that after payment by Employee of all of Employee's applicable Federal, state and local taxes, including any interest and penalties assessed by any taxing authority,
on the Later Payment, Employee will retain from the Later Payment an amount equal to the Additional Excise Tax, which Employee shall use to pay the Additional Excise Tax. 


        13.    Complete Agreement.    This Agreement is not a promise of future employment. Employee has no oral
representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the
final, complete and exclusive statement and expression of the agreement between the Company and Employee 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 Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. 


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



	To the Company:	 	SOURCECORP, Incorporated

3232 McKinney Avenue

Suite 1000

Dallas, Texas 75204

Attn: Chief Operating Officer
	

with a copy to:	
 	

SOURCECORP, Incorporated

3232 McKinney Avenue

Suite 1000

Dallas, Texas 75204

Attn: General Counsel
	

with a copy to:	
 	

Locke Liddell & Sapp LLP

2200 Ross Avenue

Suite 2200

Dallas, Texas 75201

Attn: Charles C. Reeder, Esq.
	

To Employee:	
 	

Michael S. Rupe

4569 Belfort Place

Dallas, Texas 75205








Notice
shall be deemed 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, whichever is earlier. Hand delivery shall also constitute effective notice and shall be deemed given and effective upon receipt. Either party may change the address for notice
by notifying the other party of such change in accordance with this Section 11. 


        15.    Severability; Headings.    If any portion of this Agreement is held invalid or inoperative in any circumstance,
(i) such portion shall remain valid and operative in all other circumstances; (ii) the other portions of this Agreement shall be deemed valid and operative; and (iii) so far as is
reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in
any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof. 


        16.    Arbitration.    Any unresolved dispute or controversy arising under or in connection with this Agreement or
Employee's employment shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration
Association then in effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee
was terminated without disability or good cause, as defined in Sections 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The costs of any arbitration proceeding shall be borne by the
party or parties not prevailing in such proceeding as determined by the arbitrators. This Section shall survive any termination of this Agreement. 


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        17.    Governing Law.    This Agreement shall in all respects be construed according to the laws of the State of
Delaware. 


        [Balance of sheet intentionally left blank]


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	 	 	EMPLOYEE:
	

 	
 	

/s/  MICHAEL S. RUPE      
 Michael S. Rupe
	

 	
 	
SOURCECORP, Incorporated
	

 	
 	

By:	

/s/  ED H. BOWMAN, JR.      
 Title: President & CEO
	

 	
 	
SOURCECORP Management, L.P.
	

 	
 	

By:	

SRCP Management, Inc.,

    General Partner





	

 	
 	

 	
 	

 	

By: /s/  JOE A. ROSE      

	 	 	 	 	 	Title: EVP & COO




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Exhibit 10.78


EMPLOYMENT AGREEMENT (Michael S. Rupe)

R E C I T A L S

A G R E E M E N T S