**Exhibit10.5**

 

**AMENDEDAND RESTATED EMPLOYMENT AGREEMENT**

**(ThomasC. Walker)**

 

This Employment Agreement (the “Agreement”) by andbetween *SOURCECORP,*Incorporated,a Delaware corporation, and *SOURCECORP*Management, L.P., a Texas limited partnership and indirect wholly ownedsubsidiary 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 otheremployment agreements or understandings, written or oral, between the Companyand 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 isengaged primarily in the business of providing document and informationmanagement outsourcing solutions.

 

Employee is employed hereunder by the Company in aconfidential relationship wherein Employee, in the course of his employmentwith the Company, has and will continue to become familiar with and aware ofinformation 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 beestablished and maintained at great expense to the Company; this information isa trade secret and constitutes the valuable goodwill of the Company.  In consideration for Employee’s promisesherein, the Company agrees to provide Employee with such confidential information;in return, Employee recognizes and acknowledges that such information must bemaintained in confidence, and to further such protection agrees to theprovisions 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 Employeeas Chairman of the Board and Chief Development Officer.  As such, Employee shall haveresponsibilities, duties and authority reasonably accorded to and expected of aChairman of the Board and Chief Development Officer and will report directly tothe Board of Directors of the Company (the “Board”).  Employee hereby accepts this employment upon the terms and conditionsherein contained and, subject to Section 1(b), agrees to devote his workingtime, attention and efforts to promote and further the business of the Company.

 

1

----

 

## (b)           Employee shall not, during the termof his employment hereunder, be engaged in any other business activity pursuedfor gain, profit or other pecuniary advantage except to the extent that suchactivity (i) does not interfere with Employee’s duties and responsibilitieshereunder and (ii) does not violate Section 3 hereof.  The foregoing limitations shall not be construed as prohibitingEmployee from (A) serving on the boards of directors of other companies or(B) making personal investments in such form or manner as will neitherrequire his services, other than to a minimal extent, in the operation oraffairs of the companies or enterprises in which such investments are made norviolate the terms of Section 3 hereof.

 

# 2.             Compensation.  For all services rendered by Employee, theCompany 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 payrollprocedures but not less than bi-weekly. On at least an annual basis, the Board will review Employee’sperformance and may make increases to such base salary if, in its discretion,any such increase is warranted. Such recommended increase would, in alllikelihood, require approval by the Board or a duly constituted committeethereof.

 

## (b)           *Incentive Bonus Plan*.  Employee shall be eligible for a bonusopportunity of up to 65% of his annual base salary in accordance with theCompany’s Incentive Bonus Plan as modified from time to time, payable in cashand/or equity of the Company (at the Company’s discretion).  The bonus payment and the Company’s targetedperformance shall be determined and approved by the Board or the compensationcommittee thereof.

 

## (c)           *Executive Perquisites, Benefits and OtherCompensation*.  Employee shallbe entitled to receive additional benefits and compensation from the Company insuch form and to such extent as specified below:

###  

### (i)            Payment of allpremiums for coverage for Employee and his dependent family members underhealth, hospitalization, disability, dental, life and other insurance plansthat the Company may have in effect from time to time, and not less favorablethan the benefits provided to other Company executives.

 

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

 

### (iii)          Four (4) weeks paidvacation for each year during the period of employment or such greater amountas may be afforded officers and key employees generally under the Company’spolicies in effect from time to time (prorated for any year in which Employeeis employed for less than the full year).

###  

### (iv)          An automobileallowance in the amount of $1,000 per month.

 

### (v)           The Company shallreimburse Employee up to $300 per month for club

###  

### 2

### 

###  

### dues actuallyincurred by Employee, provided that such club is used at least 50% ofthe time for business purposes.

 

### (vi)          The Company shallprovide Employee with other executive perquisites as may be available to ordeemed appropriate for Employee by the Board and participation in all otherCompany-wide employee benefits as available from time to time, which willinclude participation in the Company’s Incentive Compensation Plan.

 

### (vii)         The Company shall provideEmployee with reasonable assistance in personal tax planning from the Company’sauditors.

 

### (viii)        Participation in theCompany’s 401(k) Plan and Non-Qualified Plan.

 

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

###  

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

 

# 3.             Non-Competition Agreement.

 

## (a)           Subject to Sections 5(d) and (f) andSection 12, Employee will not, during the period of his employment by or withthe Company, and for a period of two (2) years immediately following thetermination of his employment with the Company, for any reason whatsoever,directly or indirectly, for himself or on behalf of or in conjunction with anyother person, company, partnership, corporation, business or entity of whatevernature:

 

### (i)            engage, as anofficer, director, shareholder, owner, partner, joint venturer, or in amanagerial capacity, whether as an employee, independent contractor, consultantor advisor, or as a sales representative, in any business selling any productsor services in direct competition with the Company, within 100 miles of (i) theprincipal executive offices of the Company or (ii) any place to which the Companyprovides products or services or in which the Company (including thesubsidiaries thereof) is in the process of initiating business operationsduring the term of this covenant (the “Territory”);

 

### (ii)           call upon anyperson who is, at that time, within the Territory, an employee of the Company(including the subsidiaries thereof) in a managerial capacity for the purposeor with the intent of enticing such employee away from or out of the employ ofthe Company (including the subsidiaries thereof), provided that Employee shallbe permitted to call upon and hire any member of his immediate family;

 

### (iii)          call upon anyperson or entity which is, at that time, or which has been, within one (1) yearprior to that time, a customer of the Company (including the subsidiariesthereof) within the Territory for the purpose of soliciting or selling productsor services in direct competition with the Company within the Territory;

 

3

----

 

### (iv)          call upon anyprospective acquisition candidate, on Employee’s own behalf or on behalf of anycompetitor, which candidate was either called upon by the Company (includingthe subsidiaries thereof) or for which the Company made an acquisitionanalysis, 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 orpurpose whatsoever.

 

As used in Section 3(a), references to thebusiness, customers, Territory, etc. of the Company refer to the status of theCompany prior to any Change in Control (*i.e.*,such breadth of business, customers, Territory, etc. shall not automatically beexpanded to include those of a successor to the Company resulting from a Changein Control).  Notwithstanding the above,the foregoing covenant shall not be deemed to prohibit Employee from acquiringas an investment not more than three percent (3%) of the capital stock of acompeting business, whose stock is traded on a national securities exchange orover-the-counter.

 

## (b)           Because of the difficulty ofmeasuring economic losses to the Company as a result of a breach of theforegoing covenant, and because of the immediate and irreparable damage thatcould be caused to the Company for which it would have no other adequateremedy, Employee agrees that the foregoing covenant may be enforced by theCompany in the event of breach by him by injunctions and restraining orderswithout the necessity of posting any bond therefor.

 

## (c)           In the course of Employee’semployment with the Company, Employee will become exposed to certain of theCompany’s confidential information and business relationships, which the abovecovenants are designed to protect.  Itis agreed by the parties that the foregoing covenants in this Section 3 imposea reasonable restraint on Employee in light of the activities and business ofthe Company (including the Company’s subsidiaries) on the date of the executionof this Agreement and the current plans of the Company (including the Company’ssubsidiaries); but it is also the intent of the Company and Employee that suchcovenants 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 oftermination of the employment of Employee, subject to the followingparagraph.  For example, if, during theTerm of this Agreement, the Company (including the Company’s subsidiaries)engages in new and different activities, enters a new business or establishednew locations for its current activities or business in addition to or otherthan the activities or business enumerated under the Recitals above or thelocations currently established therefor, then Employee will be precluded fromsoliciting the customers or employees of such new activities or business orfrom such new location and from directly competing with such new businesswithin 100 miles of its then-established operating location(s) through the termof this covenant.

 

It is further agreed by the parties hereto that, inthe event that Employee shall cease to be employed hereunder, and shall enterinto a business or pursue other activities not in competition with the Company(including the Company’s subsidiaries), or similar activities or business inlocations the operation of which, under such circumstances, does not violateclause (i) of this Section 3, and in any event such new business, activities orlocation are not in violation

 

4

----

 

of this Section 3 or of Employee’s obligations under this Section 3, ifany, Employee shall not be chargeable with a violation of this Section 3 if theCompany (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 areseverable and separate, and the unenforceability of any specific covenant shallnot affect the provisions of any other covenant.  Moreover, in the event any court of competent jurisdiction shalldetermine that the scope, time or territorial restrictions set forth areunreasonable, then it is the intention of the parties that such restrictions beenforced to the fullest extent which the court deems reasonable, and theAgreement shall thereby be reformed to such extent.

 

## (e)           All of the covenants in this Section3 shall be construed as an agreement independent of any other provision in thisAgreement, and the existence of any claim or cause of action of Employeeagainst the Company, whether predicated on this Agreement or otherwise, shallnot constitute a defense to the enforcement by the Company of such covenants.  It is specifically agreed that the period oftwo (2) years following Employee’s employment set forth at the beginning ofthis Section 3, during which the agreements and covenants of Employee made inthis Section 3 shall be effective, shall be computed by excluding from suchcomputation any time during which Employee is in violation of any provision ofthis Section 3.

 

# 4.             Place of Performance.

 

## (a)           Employee’s place of employment is theCompany’s headquarters in Dallas, Texas. Employee understands that he may be requested by the Board to relocatefrom his present residence to another geographic location in order to moreefficiently carry out his duties and responsibilities under this Agreement oras part of a promotion or other increase in duties and responsibilities.  In the event that Employee is requested torelocate and agrees to do so, the Company will pay all relocation costs to moveEmployee, 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 costsprior to moving into a new permanent residence; duplicate home carrying costs;all closing costs on the sale of Employee’s present residence and on thepurchase of a comparable residence in the new location; and added income taxesthat Employee may incur, as a result of any payment hereunder, to the extentany relocation costs are not deductible for tax purposes.  The general intent of the foregoing is thatEmployee shall not personally bear any out-of-pocket cost as a result of therelocation, with an understanding that Employee will use his best efforts toincur only those costs which are reasonable and necessary to effect a smooth,efficient and orderly relocation with minimal disruption to the businessaffairs of the Company and the personal life of Employee and his family.

 

## (b)           Notwithstanding the above, ifEmployee is requested by the Board to relocate and Employee refuses, suchrefusal shall not constitute “good cause” for termination of this Agreementunder the terms of Section 5(c).

 

# 5.             Term; Termination; Rights onTermination.  The term of this Agreement shall begin on thedate hereof and continue through December 31, 2004; however, on eachDecember 31, the term of this Agreement shall automatically renew for atwo-year period (such

#  

# 5

# 

#  

that upon such renewal, the new remaining termshall be two years), unless written notice is given on or prior to the December31st of any year during the term (including any renewal thereof)that it will not be renewed, and upon such notice, the balance of the termshall be two (2) years from the January 1st following such notice(the “Term”).  This Agreement andEmployee’s employment may be terminated in any one of the following ways:

 

(a)           *Death*. The death of Employee shall immediately terminate the Agreement with noseverance compensation due to Employee’s estate.

 

(b)           *Disability*.  If, as a result of incapacity due to physical or mental illnessor injury, Employee shall have been absent from his full-time duties hereunderfor four (4) consecutive months, then thirty (30) days after receiving writtennotice (which notice may occur before or after the end of such four (4) monthperiod, but which shall not be effective earlier than the last day of such four(4) month period), the Company may terminate Employee’s employment hereunderprovided Employee is unable to resume his full-time duties at the conclusion ofsuch notice period.  Also, Employee mayterminate his employment hereunder if his health should become impaired to anextent that makes the continued performance of his duties hereunder hazardousto his physical or mental health or his life, provided that Employee shall havefurnished the Company with a written statement from a qualified doctor to sucheffect 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 anexamination by a doctor selected by the Company who is reasonably acceptable toEmployee or Employee’s doctor and such doctor shall have concurred in theconclusion of Employee’s doctor.  In theevent 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 ratethen in effect for whatever time period is remaining under the Term of thisAgreement or for one (1) year, whichever amount is greater.

 

(c)           *Good Cause*.  The Company may terminate the Agreement ten (10) days afterwritten notice to Employee for good cause, which shall be: (1) Employee’smaterial and irreparable breach of this Agreement; (2) Employee’s grossnegligence in the performance or intentional nonperformance (continuing for ten(10) days after receipt of the written notice of same) of any of Employee’smaterial duties and responsibilities hereunder; (3) Employee’s dishonesty,fraud or misconduct with respect to the business or affairs of the Companywhich materially and adversely affects the operations or reputation of theCompany; (4) Employee’s conviction of a felony crime; or (5) chronic alcoholabuse 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 Companymay, without cause, terminate this Agreement and Employee’s employment,effective thirty (30) days after written notice is provided to theEmployee.  Should Employee be terminatedby the Company without cause, Employee shall receive from the Company, in alump-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

 

6

----

 

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 toshorten the period set forth in Section 3(a) and during which the terms ofSection 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 employmenthereunder for “Good Reason.”  As usedherein, “Good Reason” shall mean the continuance of any of the following afterten (10) days’ prior written notice by Employee to the Company, specifying thebasis for such Employee’s having Good Reason to terminate this Agreement:

 

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

 

(ii)           Employee’s removal from, or failureto 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 thisAgreement by the Company that is not cured within the ten (10) day time periodset forth in Section 5(f) above, including the failure to pay Employee on atimely basis the amounts to which he is entitled under this Agreement.

 

In the event of any termination by the Employee for Good Reason, asdetermined by a court of competent jurisdiction or pursuant to the provisionsof Section 16 below, the Company shall pay all amounts and damages to which Employeemay be entitled as a result of such breach, including interest thereon and allreasonable legal fees and expenses and other costs incurred by Employee toenforce his rights hereunder.  Inaddition, Employee shall be entitled to receive Severance Pay equivalent to thebase salary at the rate then in effect for whatever time period is remainingunder the Term of this Agreement or for two (2) years, whichever amount isgreater.  Further, none of theprovisions of Section 3 shall apply in the event this Agreement is terminatedby Employee for Good Reason.

 

(g)           *Termination by Employee Without Cause*.  If Employee resigns or otherwise terminateshis employment without Good Reason pursuant to Section 5(f), Employee shallreceive 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 compensationearned and all benefits vested and reimbursements due through the effectivedate of termination.  Additionalcompensation subsequent to such a termination of this Agreement, if any, willbe due and payable to Employee only to the extent and in the manner expresslyprovided above or in Section 16.  Exceptas

 

7

----

 

otherwise provided in this Section 5, all other rights and obligationsof the Company and Employee under this Agreement shall cease as of theeffective date of termination of this Agreement; however, the Company’sobligations under Section 9 herein and Employee’s obligations under Sections 3,6, 7, 8 and 10 herein shall survive such termination in accordance with theirterms.

 

# 6.             Return of Company Property.  All records, designs, patents, businessplans, financial statements, manuals, memoranda, lists and other propertydelivered to or compiled by Employee by or on behalf of the Company (includingthe Company’s subsidiaries) or its representatives, vendors or customers whichpertain 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 toits discretion and control.  Likewise,all correspondence, reports, records, charts, advertising materials and othersimilar data pertaining to the business, activities or future plans of theCompany (including the Company’s subsidiaries) which is collected by Employeeshall be delivered promptly to the Company without request by it upontermination of Employee’s employment.

 

# 7.             Inventions.  Employee shall disclose promptly to theCompany any and all significant conceptions and ideas for inventions,improvements and valuable discoveries, whether patentable or not, which areconceived or made by Employee, solely or jointly with another, during theperiod of employment or within one (1) year thereafter, and which are directlyrelated to the business or activities of the Company (including the Company’ssubsidiaries) and which Employee conceives as a result of his employment by theCompany.  Employee hereby assigns andagrees 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 otherinstruments that the Company shall deem necessary to apply for and obtainletters patent of the United States or any foreign country or to otherwiseprotect the Company’s interest therein.

 

# 8.             Trade Secrets.  Employee agrees that he will not, during orafter the term of this Agreement with the Company, disclose the specific termsof the Company’s (including the Company’s subsidiaries) relationships oragreements with its significant vendors or customers or any other significantand material trade secret of the Company (including the Company’ssubsidiaries), 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 anythreatened, pending or completed action, suit or proceeding, whether civil,criminal, administrative or investigative (other than an action by the Companyagainst Employee), by reason of the fact that he is or was performing servicesunder this Agreement, then the Company shall indemnify Employee against allexpenses (including attorneys’ fees), judgments, fines and amounts paid insettlement, as actually and reasonably incurred by Employee in connectiontherewith.  In the event that bothEmployee and the Company are made a party to the same third-party action,complaint, suit or proceeding, the Company agrees to engage competent legalrepresentation, and Employee agrees to use the same representation, providedthat if counsel selected by the Company shall have a conflict of interest thatprevents such counsel from representing Employee, Employee may engage separatecounsel and the Company shall pay all attorneys’ fees

#  

# 8

# 

#  

# of such separatecounsel.  Further, while Employee isexpected at all times to use his best efforts to faithfully discharge hisduties under this Agreement, Employee cannot be held liable to the Company forerrors or omissions made in good faith where Employee has not exhibited gross,willful and wanton negligence and misconduct or performed criminal andfraudulent acts which materially damage the business of the Company.

 

# 10.           No Prior Agreements.  Employee hereby represents and warrants tothe Company that the execution of this Agreement by Employee and his employmentby the Company and the performance of his duties hereunder will not violate orbe a breach of any agreement with a former employer, client or any other personor entity.  Further, Employee agrees toindemnify the Company for any claim, including, but not limited to, attorneys’fees and expenses of investigation, by any such third party that such thirdparty may now have or may hereafter come to have against the Company based uponor arising out of any non-competition agreement, invention or secrecy agreementbetween Employee and such third party which was in existence as of the date ofthis Agreement.

 

# 11.           Assignment; Binding Effect.  Employee understands that he has beenselected for employment by the Company on the basis of his personalqualifications, experience and skills. Employee agrees, therefore, he cannot assign all or any portion of hisperformance under this Agreement and the Company agrees not to assign all orany portion of its obligations under this Agreement (other than to a successoras a result of a Change in Control). Subject to the preceding two (2) sentences and the express provisions ofSection 12 below, this Agreement shall be binding upon, inure to the benefit ofand be enforceable by the parties hereto and their respective heirs, legalrepresentatives, successors and assigns.

 

# 12.           Change in Control.

 

(a)           Unlesshe elects to terminate this Agreement pursuant to (c) below, Employeeunderstands and acknowledges that the Company may be merged or consolidatedwith or into another entity and that such entity shall automatically succeed tothe rights and obligations of the Company hereunder.

 

(b)           Inthe event of a pending Change in Control wherein the Employee has not receivedwritten notice at least fifteen (15) business days prior to the anticipated closingdate of the transaction giving rise to the Change in Control from the successorto all or a substantial portion of the Company’s business and/or assets thatsuch successor 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 3.64 timesthe sum of Employee’s annual salary plus maximum bonus opportunity in effectimmediately prior to the Change in Control and the non-competition provisionsof Section 3 shall not apply whatsoever. Payment shall be made either at closing of the transaction if notice isserved at least five (5) days before closing or within ten (10) days ofEmployee’s written notice.

 

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

 

9

----

 

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

 

(d)           Forpurposes 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 dateof the transaction 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 the Securities and Exchange Commission’s regulationsto elect whether to exercise and sell all or any of his vested options topurchase Common Stock of the Company, including any options with acceleratedvesting under the provisions of the Company’s stock option or similar plan, asamended or any warrants, such that he may convert the options or warrants toshares of Common Stock of the Company at or prior to the closing of thetransaction 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 Companyor an employee benefit plan of the Company, acquires directly or indirectly theBeneficial Ownership (as defined in Section 13(d) of the Securities ExchangeAct of 1934, as amended) of any voting security of the Company and immediatelyafter such acquisition such person is, directly or indirectly, the BeneficialOwner of voting securities representing 30% or more of the total voting powerof 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 approved by a vote of at least two-thirds (2/3) ofthe Original Directors and Additional Original Directors then still in office (suchdirectors also becoming “Additional Original Directors” immediately followingtheir election), cease for any reason to constitute a majority of the membersof the Board of Directors of the Company;

 

(iii)          the consummation of a merger,consolidation, recapitalization or reorganization of the Company, a reversestock split of outstanding voting securities of the Company, or consummation ofany such transaction if stockholder approval is not sought or obtained, otherthan any such transaction which would result in at least 75% of

 

10

----

 

the total voting power represented by the votingsecurities of the surviving entity outstanding immediately after suchtransaction being Beneficially Owned by holders of at least 75% of theoutstanding voting securities of the Company immediately prior to thetransaction, with the voting power of each such continuing holder relative toother such continuing holders not substantially altered in the transaction; or

 

(iv)          the consummation of a completeliquidation of the Company or an agreement for the sale or disposition by theCompany of all or a substantial portion of the Company’s assets (i.e., 50% ormore of the total assets of the Company (including the Company’s subsidiaries)).

 

(f)            Continuation of Benefits.  (i) Following the termination of theExecutive’s employment in connection with a Change in Control (as contemplatedby Section 12(b) or 12(c) of this Agreement) (a “Change in ControlTermination”) and until the earlier of (A) three (3) years following suchChange in Control Termination or (B) the date on which the Executive becomesemployed by a new employer (other than to the successor to the Companyfollowing such Change in Control), the Company shall, at its expense, providethe Executive with medical, dental, life insurance, disability and accidentaldeath and dismemberment benefits (“Insurance Benefits”) at the highest levelprovided to the Executive immediately prior to the Change in Control; provided,however, if the Executive becomes employed by a new employer that maintainsInsurance Benefits that either (x) do not cover the Executive with respect to apre-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) donot provide for a certain benefit, the Executive’s coverage under the Company’sInsurance Benefits shall continue (with respect to such area of non-coveragedescribed in (x), (y) or (z), as applicable), without limitation, until theearlier of the end of the applicable period of non-coverage under the newemployer’s Insurance Benefits or the third anniversary of the Change inControl.

 

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

 

(iii)  The Company shall reimburse all reasonableexpenses incurred by the Executive for reasonable office and secretarialexpenses and for reasonable professional outplacement services by qualifiedconsultants selected by the Executive for up to 3 years after a Change inControl Termination.

 

(iv)  The Executive shall not be required to seekother employment following a Change in Control Termination and any compensationearned from other employment shall not reduce the amounts otherwise payableunder this Agreement.

 

(g)           If any portion of the severancebenefits, Change in Control benefits or any other payment under this Agreement,or under any other agreement with, or plan of the Company, including but notlimited to stock options, warrants and other long-term incentives (in theaggregate “Total Payments”) would be subject to the excise tax imposed bySection 4999 of the Code, as amended (or any similar tax that mayhereafter be imposed) or any interest or penalties with respect to such excisetax (such excise tax, together with any such interest and penalties, are

 

11

----

 

hereinafter collectivelyreferred to as the “Excise Tax”), then Employee shall be entitled to receivefrom the Company an additional payment (the “Gross-up Payment”) (i.e., inaddition to such other severance benefits, Change in Control benefits or anyother payments under this Agreement) in an amount such that the net amount ofTotal Payments and Gross-up Payment retained by the Employee, after thecalculation and deduction of all Excise Tax on the Total Payments and allfederal, state and local income tax, employment tax and Excise Tax on the Gross-upPayment, shall be equal to the Total Payments.

 

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

 

All determinations required to be made under thisSection 12, including whether a Gross-Up Payment is required under thisSection, and the assumptions to be used in determining the Gross-Up Payment,shall be made by the Company’s current independent accounting firm, or suchother firm as the Company may designate in writing prior to a Change in Control(the “Accounting Firm”), which shall provide detailed supporting calculationsboth to the Company and Employee within twenty business days of the receipt ofnotice from Employee that there will likely be a Change in Control, or suchearlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant orauditor for the party effecting the Change in Control or is otherwiseunavailable, Employee (together with all other employees with comparableappointment rights in their respective employment agreements such 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 aboveshall be borne solely by the Company.

 

Employee agrees (unless requested otherwise by theCompany) to use reasonable efforts to contest in good faith any subsequentdetermination by the Internal Revenue Service that Employee owes an amount ofExcise Tax greater than the amount determined pursuant to this Section; provided,that Employee shall be entitled to reimbursement by the Company (on an aftertax basis) of all fees and expenses reasonably incurred by Employee incontesting such determination.  In theevent the Internal Revenue Service or any court of competent jurisdictiondetermines that Employee owes an amount of Excise Tax that is greater than theamount previously 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 tothe Additional Excise Tax, which Employee shall use to pay the AdditionalExcise Tax.

 

12

----

 

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

 

# 13.           Complete Agreement.  This Agreement is not a promise of futureemployment.  Employee has no oralrepresentations, understandings or agreements with the Company or any of itsofficers, directors or representatives covering the same subject matter as thisAgreement.  This written Agreement isthe final, complete and exclusive statement and expression of the agreementbetween the Company and Employee and of all the terms of this Agreement, and itcannot be varied, contradicted or supplemented by evidence of any prior orcontemporaneous oral or written agreements, including without limitation Employee’sAmended and Restated Employment Agreement dated April 8, 2002 (as amended bythat certain First Amendment to Amended and Restated Employment Agreement datedApril 8, 2002), which is superseded and replaced in its entirety by thisAgreement.  This written Agreement maynot be later modified except by a further writing signed by a duly authorizedofficer of the Company and Employee, and no term of this Agreement may bewaived 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 thedeposit in the U.S. mail of a writing addressed as above and sent first classmail, certified, return receipt requested, or when

 

13

----

 

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

 

# 15.           Severability; Headings.  If any portion of this Agreement is heldinvalid or inoperative, the other portions of this Agreement shall be deemedvalid and operative and, so far as is reasonable and possible, effect shall begiven to the intent manifested by the portion held invalid or inoperative.  The Section headings herein are forreference 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 controversyarising under or in connection with this Agreement or Employee’s employmentshall be settled exclusively by arbitration, conducted before a panel of three(3) arbitrators in Dallas, Texas, in accordance with the rules of the AmericanArbitration Association then in effect. The arbitrators shall not have the authority to add to, detract from, ormodify any provision hereof nor to award punitive damages to any injured party.  The arbitrators shall have the authority toorder back-pay, severance compensation, vesting of options (or cashcompensation in lieu of vesting of options), reimbursement of costs, includingthose incurred to enforce this Agreement, and interest thereon in the event thearbitrators determine that Employee was terminated without disability or goodcause, as defined in Sections 5(b) and 5(c), respectively, or that the Companyhas otherwise materially breached this Agreement.  A decision by a majority of the arbitration panel shall be finaland binding.  Judgment may be entered onthe arbitrators’ award in any court having jurisdiction.  The costs of any arbitration proceedingshall be borne by the party or parties not prevailing in such proceeding asdetermined by the arbitrators.  ThisSection shall survive any termination of this Agreement.

 

 

**[Balance of page intentionally left blank]**

 

14

----

 

# 17.           Governing Law.  This Agreement shall in all respects beconstrued 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 |

 

15

----