**EXHIBIT 10.5**

** **

**FIRST AMENDMENT TO**

**AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

**(Michael S. Rupe)**

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the“Amendment”) by and between *SOURCECORP,*Incorporated, a Delaware corporation and *SOURCECORP*Management, L.P., a Texas limited partnership andindirect wholly owned subsidiary of *SOURCECORP,*Incorporated (collectively, the “Company”), and Michael S. Rupe(“Employee”) is made and entered intoeffective as of April 24, 2002.

 

**R E C I T A L S**

 

The following statements are true and correct:

 

This Amendment amends that certain Amended and Restated EmploymentAgreement by and between Employee and F.Y.I. Incorporated (n/k/a *SOURCECORP,*Incorporated), dated May 18,2001 (the “Agreement”).

 

The parties desire to amend the Agreement to amend the Change in Controlprovisions contained therein.

 

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

 

**A G R E E M E N T S**

 

1.     **Amendmentto Agreement**.  Theparties agree to amend Section 12 of the Agreement to read in its entirety asfollows:

12.             Change in Control.

 

(a)           Unless he elects to terminate thisAgreement pursuant to (c) below, Employee understands and acknowledges that theCompany may be merged or consolidated with or into another entity and that suchentity shall automatically succeed to the rights and obligations of the Companyhereunder.

 

(b)           In the event of apending Change in Control wherein the Employee has not received written noticeat least fifteen (15) business days prior to the anticipated closing date ofthe transaction giving rise to the Change in Control from the successor to allor a substantial portion of the Company’s business and/or assets that suchsuccessor is willing as of the closing to assume and agree to perform theCompany’s obligations under this Agreement in the same manner and to the sameextent that the Company is hereby required to perform, such Change in Controlshall be deemed to be a termination of this Agreement by the Company and theamount of the lump-sum severance payment due to Employee shall be 1.15 timesthe sum of Employee’s annual salary plus maximum annual bonus opportunity ineffect immediately prior to the Change in Control and the non-competitionprovisions of paragraph 3 shall not apply whatsoever.

 

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Payment shall bemade 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 inControl situation in which Employee has received written notice from thesuccessor to the Company that such pending successor is willing to assume theCompany’s obligations hereunder or Employee receives notice after (or withinfifteen (15) business days prior to) the Change in Control that Employee isbeing terminated, Employee may nonetheless, at his sole discretion, elect toterminate this Agreement by providing written notice to the Company at any timeprior to closing of the transaction and up to two (2) years after the closingof the transaction giving rise to the Change in Control.  In such case, the amount of the lump-sumseverance payment due to Employee shall be 1.15 times the sum of Employee’sannual salary plus maximum annual bonus opportunity in effect immediately priorto the Change in Control and the non-competition provisions of paragraph 3shall all apply.  Payment shall be madeeither at closing if notice is served at least five (5) days before closing orwithin ten (10) days of written notice by Employee.

 

(d)           For purposes ofapplying paragraph 5 under the circumstances described in (b) and (c) above,the effective date of termination will be the later of the closing date of thetransaction giving rise to the Change in Control or Employee’s notice asdescribed above, and all compensation, reimbursements and lump-sum payments dueEmployee must be paid in full by the Company at such time.  Further, Employee will be given sufficienttime in order to comply with then Securities and Exchange Commission’sregulations to elect whether to exercise and sell all or any of his vestedoptions to purchase Common Stock of the Company, including any options withaccelerated vesting under the provisions of the Company’s stock option orsimilar plan, as amended (and as modified by the related optionagreement/certificate in accordance with such Plan) or any warrants, such thathe may convert such options or warrants to shares of Common Stock of theCompany at or prior to the closing of the transaction giving rise to the Changein Control, if he so desires.

 

(e)           A “Change inControl” shall be deemed to have occurred if:

 

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

 

(ii)           the individuals (A) who, as of theclosing date of the Company’s initial public offering, constitute the Board ofDirectors of the Company (the “Original Directors”) or (B) who thereafter areelected to the Board of Directors of the Company and whose election, ornomination for election, to the Board of Directors of the Company was approvedby a vote of at least two-thirds (2/3) of the Original Directors then still inoffice (such directors becoming “Additional Original Directors” immediatelyfollowing their election) or (C) who are elected to the Board of Directors ofthe Company and whose election, or nomination for election, to the Board ofDirectors of the Company was

 

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approved by a voteof at least two-thirds (2/3) of the Original Directors and Additional OriginalDirectors then still in office (such directors also becoming “AdditionalOriginal Directors” immediately following their election), cease for any reasonto constitute a majority of the members of the Board of Directors of theCompany;

 

(iii)the consummation of a merger, consolidation, recapitalization, or reorganizationof the Company, a reverse stock split of outstanding voting securities of theCompany, or consummation of any such transaction if stockholder approval is notsought or obtained, other than any such transaction which would result in atleast 75% of the total voting power represented by the voting securities of thesurviving entity outstanding immediately after such transaction beingBeneficially Owned by holders of at least 75% of the outstanding votingsecurities of the Company immediately prior to the transaction, with the votingpower of each such continuing holder relative to other such continuing holdersnot substantially altered in the transaction; or

 

(iv)the consummation of a plan of complete liquidation of the Company or anagreement for the sale or disposition by the Company of all or a substantialportion of the Company’s assets (i.e., 50% or more of the total assets of theCompany).

 

 (f)           Ifany portion of the severance benefits, Change in Control benefits or any otherpayment under this Agreement, or under any other agreement with, or plan of theCompany, including but not limited to stock options, warrants and otherlong-term incentives (in the aggregate “Total Payments”) would be subject tothe excise tax imposed by Section 4999 of the Code, as amended (or anysimilar tax that may hereafter be imposed) or any interest or penalties withrespect to such excise tax (such excise tax, together with any such interestand penalties, are hereinafter collectively referred to as the “Excise Tax”),then Employee shall be entitled to receive from the Company an additionalpayment (the “Gross-up Payment”) in an amount such that the net amount of TotalPayments and Gross-up Payment retained by the Employee, after the calculationand deduction of all Excise Tax on the Total Payments and all federal, stateand local income tax, employment tax and Excise Tax on the Gross-up Payment,shall be equal to the Total Payments.

 

For purposes of this paragraph Employee’sapplicable Federal, state and local taxes shall be computed at the maximummarginal rates, taking into account the effect of any loss of personalexemptions resulting from receipt of the Gross-Up Payment.

 

All determinationsrequired to be made under this paragraph 12, including whether a Gross-UpPayment is required under this paragraph, and the assumptions to be used indetermining the Gross-Up Payment, shall be made by the Company’s currentindependent accounting firm, or such other firm as the Company may designate inwriting prior to a Change in Control (the “Accounting Firm”), which shallprovide detailed supporting calculations both to the Company and Employeewithin twenty business days of the receipt of notice from Employee that therewill likely be a Change in Control, or such earlier time as is requested by theCompany.  In the event that theAccounting Firm is serving as accountant or auditor for the party effecting theChange in Control or is otherwise unavailable, Employee (together with all otheremployees with comparable appointment rights in their respective employmentagreements such

 

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that all suchemployees may collectively select a single accounting firm) may appoint anothernationally recognized accounting firm to make the determinations requiredhereunder (which accounting firm shall then be referred to as the AccountingFirm hereunder).  All fees and expensesof the Accounting Firm with respect to such determinations described above shallbe borne solely by the Company.

 

Employee agrees(unless requested otherwise by the Company) to use reasonable efforts tocontest in good faith any subsequent determination by the Internal RevenueService that Employee owes an amount of Excise Tax greater than the amountdetermined pursuant to this paragraph; provided, that Employee shall beentitled to reimbursement by the Company (on an after tax basis) of all feesand expenses reasonably incurred by Employee in contesting suchdetermination.  In the event theInternal Revenue Service or any court of competent jurisdiction determines thatEmployee owes an amount of Excise Tax that is greater than the amountpreviously taken into account and paid under this Agreement (such additionalExcise Tax being the “Additional Excise Tax”), the Company shall promptly payto Employee the amount of such shortfall. In the case of any payment that the Company is required to make toEmployee pursuant to the preceding sentence (a “Later Payment”), the Companyshall also pay to Employee an additional amount such that after payment byEmployee of all of Employee’s applicable Federal, state and local taxes,including any interest and penalties assessed by any taxing authority, on theLater Payment, Employee will retain from the Later Payment an amount equal to theAdditional Excise Tax, which Employee shall use to pay the Additional ExciseTax.

2.     **GoverningLaw**.  This Amendmentshall in all respects be construed according to the laws of the State of Texas.

3.     **Counterparts**.  This Amendment may be executed simultaneouslyin two (2) or more counterparts, each of which shall be deemed an original andall of which together shall constitute but one and the same instrument.

4.     **Effect of Amendment**.  Except as specifically amended by thisAmendment, all provisions of the Agreement remain in full force and effect inaccordance with their express terms.

** **

**[Balance ofpage intentionally left blank]**

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement asof the day and year first above written.

 
|   | *SOURCECORP,* INCORPORATED |
|--------|---------------------------------|
|   |                            |
|   |                            |
|   | By:                             | /s/ Joe Rose |
|   | Title:                          | Chief Operating Officer and Executive Vice President |
|   |                            |
|   |                            |
|   | *SOURCECORP*Management,  L.P.   |
|   |                            |
|   |                            |
|   | By: SRCP**Management,  Inc.,    |
|   | General Partner                 |
|   |                            |
|   |                            |
|   | By:                             | /s/ Joe Rose |
|   | Title:                          | Chief Operating Officer |
|   |                            |
|   |                            |
|   | EMPLOYEE:                       |
|   |                            |
|   |                            |
|   | /s/ Michael S. Rupe             |
|   | MICHAEL S. RUPE                 |

 

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