Exhibit
10.5


 


AMENDED
AND RESTATED EMPLOYMENT AGREEMENT


(Thomas
C. Walker)


 


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 Thomas C. Walker (“Employee”)
is hereby entered into and effective as of April 1, 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 Chairman of the Board and Chief Development Officer.  As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
Chairman of the Board and Chief Development Officer and will report directly to
the Board of Directors of the Company (the “Board”).  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.


 


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(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 or
(B) making personal investments in such form or manner as will neither
require his services, other than to a 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 $330,000 per year,
payable on a regular basis in accordance with the Company’s standard payroll
procedures but not less than bi-weekly. 
On at least an annual basis, the Board will review Employee’s
performance and may make increases to such base salary if, in its discretion,
any such increase is warranted. Such recommended increase would, in all
likelihood, require approval by the Board or a duly constituted committee
thereof.


 


(b)           Incentive Bonus Plan.  Employee shall be eligible for a bonus
opportunity of up to 65% of his annual base salary in accordance with the
Company’s Incentive Bonus Plan as modified from time to time, payable in cash
and/or equity of the Company (at the Company’s discretion).  The bonus payment and the Company’s targeted
performance shall be determined and approved by the Board or the compensation
committee thereof.


 


(c)           Executive Perquisites, Benefits and Other
Compensation.  Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:


 


(i)            Payment of all
premiums for coverage for Employee and his dependent family members under
health, hospitalization, disability, dental, life and other insurance plans
that the Company may have in effect from time to time, and not less favorable
than the benefits provided to other Company executives.


 


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


 


(iii)          Four (4) weeks paid
vacation for each year during the period of employment or such greater amount
as may be afforded officers and key employees generally under the Company’s
policies in effect from time to time (prorated for any year in which Employee
is employed for less than the full year).


 


(iv)          An automobile
allowance in the amount of $1,000 per month.


 


(v)           The Company shall
reimburse Employee up to $300 per month for club


 


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dues actually
incurred by Employee, provided that such club is used at least 50% of
the time for business purposes.


 


(vi)          The Company shall
provide Employee with other executive perquisites as may be available to or
deemed appropriate for Employee by the Board and participation in all other
Company-wide employee benefits as available from time to time, which will
include participation in the Company’s Incentive Compensation Plan.


 


(vii)         The Company shall provide
Employee with reasonable assistance in personal tax planning from the Company’s
auditors.


 


(viii)        Participation in the
Company’s 401(k) Plan and Non-Qualified Plan.


 


(ix)           The Company shall,
under Employee’s direction, establish a Supplemental Retirement Plan/Survivor
Protection Plan to be placed inside the Company’s Non-Qualified Plan and
provide Employee with such benefit.


 


(x)            The Company shall
reimburse Employee up to $7,000 per year for expenditures on health costs,
insurance, financial planning or tax planning benefits (or similar benefits, or
such other benefits at the discretion of the Company) or club dues, all as
selected by Employee.


 


3.             Non-Competition Agreement.


 


(a)           Subject to Sections 5(d) and (f) and
Section 12, Employee will not, during the period of his employment by or with
the Company, and for a period of two (2) years 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 (i) the
principal executive offices of the Company or (ii) 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 any
person who is, at that time, within the Territory, an employee of the Company
(including the subsidiaries thereof) in a managerial capacity for the purpose
or with the intent of enticing such employee away from or out of the employ of
the Company (including the subsidiaries thereof), provided that Employee shall
be permitted to call upon and hire any member of his immediate family;


 


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


 


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(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


 


(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), 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 (i) of this Section 3, and in any event such new business, activities or
location are not in violation


 


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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 if 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 which the court deems reasonable, and the
Agreement shall thereby be reformed to such extent.


 


(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 of
two (2) years 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.


 


(a)           Employee’s place of employment is the
Company’s headquarters in Dallas, Texas. 
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 that Employee is requested to
relocate and agrees to do so, the Company will pay all 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 which 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.


 


(b)           Notwithstanding the above, if
Employee is requested by the Board to relocate and Employee refuses, such
refusal shall not constitute “good cause” for termination of this Agreement
under the terms of Section 5(c).


 


5.             Term; Termination; Rights on
Termination.  The term of this Agreement shall begin on the
date hereof and continue through December 31, 2004; however, on each
December 31, the term of this Agreement shall automatically renew for a
two-year period (such


 


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that upon such renewal, the new remaining term
shall be two years), unless written notice is given on or prior to the December
31st of any year during the term (including any renewal thereof)
that it will not be renewed, and upon such notice, the balance of the term
shall be two (2) years from the January 1st following such notice
(the “Term”).  This Agreement and
Employee’s employment may be terminated 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 shall receive from the Company, in a lump-sum payment due within ten
(10) days of the effective date of termination, the base salary at the rate
then in effect for whatever time period is remaining under the Term of this
Agreement or for one (1) year, whichever amount is greater.


 


(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 the 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
which 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, in a
lump-sum payment (“Severance Pay”) due on the effective date of termination,
the base salary at the rate then in effect for whatever time period is


 


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remaining under the Term of this Agreement or for two
(2) years, whichever amount is greater. 
Further, any termination without cause by the Company shall operate to
shorten the period set forth in Section 3(a) and during which the terms of
Section 3 apply to one (1) year from the date of termination of employment.


 


(e)           Change in Control.  Refer to Section 12 below.


 


(f)            Termination by Employee for Good Reason.  Employee may terminate his employment
hereunder for “Good Reason.”  As used
herein, “Good Reason” shall mean the continuance of any of the following after
ten (10) days’ prior written notice by Employee to the Company, specifying the
basis for such Employee’s having Good Reason to terminate this Agreement:


 


(i)            the assignment to Employee of any
duties materially and adversely inconsistent with Employee’s position as
specified in Section 1 hereof (or such other position to which he may be
promoted), including status, offices, responsibilities or persons to whom
Employee reports as contemplated under Section 1 of this Agreement, or any
other action by the Company which results in a material and adverse change in
such position, status, offices, titles or responsibilities;


 


(ii)           Employee’s removal from, or failure
to be reappointed or reelected to, Employee’s position under this Agreement,
except as contemplated by Sections 5(a), (b), (c) and (e); or


 


(iii)          any other material breach of this
Agreement by the Company that is not cured within the ten (10) day time period
set forth in Section 5(f) above, including the failure to pay Employee on a
timely basis the amounts to which he is entitled under this Agreement.


 


In the event of any termination by the Employee for Good Reason, as
determined by a court of competent jurisdiction or pursuant to the provisions
of Section 16 below, the Company shall pay all amounts and damages to which Employee
may be entitled as a result of such breach, including interest thereon and all
reasonable legal fees and expenses and other costs incurred by Employee to
enforce his rights hereunder.  In
addition, Employee shall be entitled to receive Severance Pay equivalent to the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for two (2) years, whichever amount is
greater.  Further, none of the
provisions of Section 3 shall apply in the event this Agreement is terminated
by Employee for Good Reason.


 


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


 


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 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 16.  Except
as


 


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otherwise provided in this Section 5, 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 9 herein and Employee’s obligations under Sections 3,
6, 7, 8 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 which
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) which 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, which are
conceived or made by Employee, solely or jointly with another, during the
period of employment or within one (1) year thereafter, and which are directly
related to the business or activities of the Company (including the Company’s
subsidiaries) and which 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 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.  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


 


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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 which materially damage the business of the Company.


 


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 which 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)           Unless
he elects to terminate this Agreement pursuant to (c) below, 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 3.64 times
the sum of Employee’s annual salary plus maximum bonus opportunity in effect
immediately prior to the Change in Control and the non-competition provisions
of Section 3 shall not apply whatsoever. 
Payment shall be made either at closing of the transaction if notice is
served at least five (5) days before closing or within ten (10) days of
Employee’s written notice.


 


(c)           In
any Change in Control situation in which Employee has received written notice
from the successor to the Company that such pending successor is willing to
assume the Company’s obligations hereunder or Employee receives notice after
(or within 15 business days


 


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prior to) the Change in Control that Employee is being terminated,
Employee may nonetheless, at his sole discretion, elect to terminate this
Agreement by providing written notice to the Company at any time prior to
closing of the transaction and up to two (2) years after the closing of the
transaction giving rise to the Change in Control.  In such case, the amount of the lump-sum severance payment due to
Employee shall be 3.64 times the sum of Employee’s annual salary plus maximum
bonus opportunity in effect immediately prior to the Change in Control and the
non-competition provisions of Section 3 shall all apply.  Payment shall be made either at closing if
notice is served at least five (5) days before closing or within ten (10) days
of written notice by Employee.


 


(d)           For
purposes of applying Section 5 under the circumstances described in (b) and (c)
above, the effective date of termination will be the later of the closing date
of the transaction giving rise to the Change in Control or Employee’s notice as
described above, 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 the 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, including any options with accelerated
vesting under the provisions of the Company’s stock option or similar plan, as
amended or any warrants, such that he may convert the 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.


 


(e)           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


 


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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 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 (including the Company’s subsidiaries)).


 


(f)            Continuation of Benefits.  (i) Following the termination of the
Executive’s employment in connection with a Change in Control (as contemplated
by Section 12(b) or 12(c) of this Agreement) (a “Change in Control
Termination”) and until the earlier of (A) three (3) years following such
Change in Control Termination or (B) the date on which the Executive becomes
employed by a new employer (other than to the successor to the Company
following such Change in Control), the Company shall, at its expense, provide
the Executive with medical, dental, life insurance, disability and accidental
death and dismemberment benefits (“Insurance Benefits”) at the highest level
provided to the Executive immediately prior to the Change in Control; provided,
however, if the Executive becomes employed by a new employer that maintains
Insurance Benefits that either (x) do not cover the Executive with respect to a
pre-existing condition that was covered under the Company’s Insurance Benefits,
or (y) do not cover the Executive for a designated waiting period, or (z) do
not provide for a certain benefit, the Executive’s coverage under the Company’s
Insurance Benefits shall continue (with respect to such area of non-coverage
described in (x), (y) or (z), as applicable), without limitation, until the
earlier of the end of the applicable period of non-coverage under the new
employer’s Insurance Benefits or the third anniversary of the Change in
Control.


 


(ii)  Following a Change in Control Termination
the special benefit allowance of $7,000 contemplated by Section 2(c)(x) of
this Agreement will continue for 3 years thereafter.


 


(iii)  The Company shall reimburse all reasonable
expenses incurred by the Executive for reasonable office and secretarial
expenses and for reasonable professional outplacement services by qualified
consultants selected by the Executive for up to 3 years after a Change in
Control Termination.


 


(iv)  The Executive shall not be required to seek
other employment following a Change in Control Termination and any compensation
earned from other employment shall not reduce the amounts otherwise payable
under this Agreement.


 


(g)           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


 


11

















 


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”) (i.e., in
addition to such other severance benefits, Change in Control benefits or any
other payments under this Agreement) 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.


 


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.


 


12

















 


(h)           In the event of a Change in Control,
the Company shall require that the ultimate parent entity (or if no parent
entity, the acquiring entity itself) of any entity that acquires control
(through ownership of securities or assets, consistent with the definitional
triggers of a Change in Control set forth above) of the Company in connection
with such Change in Control assume or guaranty the Company’s obligations under
Sections 12(f) and 12(g) of this Agreement.


 


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, including without limitation Employee’s
Amended and Restated Employment Agreement dated April 8, 2002 (as amended by
that certain First Amendment to Amended and Restated Employment Agreement dated
April 8, 2002), which is superseded and replaced in its entirety by this
Agreement.  This written 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.


 


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:  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  SOURCECORP, Incorporated

  	
   

  
	
   

  	
   

  	
  3232 McKinney
  Avenue

  	
   

  
	
   

  	
   

  	
  Suite 1000

  	
   

  
	
   

  	
   

  	
  Dallas, Texas
  75204

  	
   

  
	
   

  	
   

  	
  Attn:  General Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Charles C. Reeder, Esq.

  	
   

  
	
   

  	
   

  	
  Locke Liddell
  & Sapp LLP

  	
   

  
	
   

  	
   

  	
  2200 Ross Avenue

  	
   

  
	
   

  	
   

  	
  Suite 2200

  	
   

  
	
   

  	
   

  	
  Dallas, Texas
  75201

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  To Employee:

  	
   

  	
  Thomas C. Walker

  	
   

  
	
   

  	
   

  	
  3510 Turtle
  Creek Blvd., #10 A

  	
   

  
	
   

  	
   

  	
  Dallas, Texas
  75219

  	
   

  



 


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


 


13

















 


actually received.  Either party
may change the address for notice by notifying the other party of such change
in accordance with this Section 14.


 


15.           Severability; Headings.  If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, 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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14

















 


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


 


 


	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
     /s/ Thomas C. Walker

  
	
   

  	
  Thomas C. Walker

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOURCECORP,  INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
             /s/
  Ed H. Bowman, Jr.

  
	
   

  	
   

  	
  Title: 
  President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SOURCECORP Management, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SRCP  Management,
  Inc.,

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Charles S. Gilbert

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  



 


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