Exhibit
10.1


 


EMPLOYMENT AGREEMENT


 


THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made
and entered into by and between Datalink Corporation, a Minnesota corporation
(the “Company”),
and M. Shawn O’Grady (the “Executive”)
effective as of the 17th day of December, 2009.


 


R E C I T A L S:


 


WHEREAS, the Company is a provider of data center
infrastructure, solutions and services; and


 


WHEREAS, the Company and the Executive desire to set
forth in this Agreement the terms under which Executive will serve as Executive
Vice President – Strategy and Operations of the Company;


 


NOW, THEREFORE, the parties hereto agree
as follows:


 


1.             Employment
and Duties.  The Company hereby agrees to employ the
Executive, and the Executive hereby accepts the Company’s offer to serve, as
Executive Vice President – Strategy and Operations of the Company.  As
such, the Executive shall have responsibilities, duties and authority
reasonably accorded to and expected of such an officer of the Company and will
report to the Company’s President and Chief Executive Officer.  The Executive agrees to devote the Executive’s
full business time, attention and efforts to promote and further the business
of the Company.  The Executive will faithfully adhere to, execute and
fulfill all policies established by the Board. 
The Executive will be based out of the Company’s Colorado office.


 


The
Executive will not, during the Term of Executive’s employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with the Executive’s duties and
responsibilities hereunder.  The foregoing limitations will not be
construed to prohibit the Executive from making personal investments in such
form or manner as will neither require the Executive’s services in the
operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of Section 4 hereof.


 


2.             Compensation.  For all
services rendered by the Executive on and after the date hereof, the Company
will compensate the Executive as follows:


 


(a)           Base Salary. 
Commencing on the date hereof, the base salary payable to the Executive shall
be $275,000 per year, payable on a regular basis in accordance with the Company’s
standard payroll procedures but not less than semi-monthly.  Such base
salary will be subject to review and adjustment from time to time by the
Company’s Compensation Committee (the “Compensation Committee”).


 


(b)           Incentive
Bonus Plan.  During the Term and beginning for 2010, the
Executive is entitled to an annual cash bonus (the “Annual Bonus”) based
on attainment of particular financial and business milestones (the “Performance Milestones”). 
The Annual Bonus for attainment of 100% of the Performance Milestones for a
particular year will be such percentage of base salary as set from time to time
by the Compensation Committee.


 


(i)            Performance
Milestones.  The Executive and the Company shall mutually
agree upon the Performance Milestones for each fiscal year by March 1 of
each year, and the level of Annual


 

















 


Bonus payable for any
partial or excess achievement of the Performance Milestones.  In the event
of any disagreement, the Compensation Committee will determine the percentage
of the annual Performance Milestone targets achieved by the Executive.


 


(ii)           Payment.  Each
Annual Bonus amount is payable by March 15 of the following calendar year
or, if sooner, on the date that the Company distributes annual bonus payments
to its other senior executive officers.


 


(c)           Executive
Perquisites, Benefits and Other Compensation.  Commencing on the
date hereof, the Executive shall be entitled to receive additional benefits and
compensation from the Company in such form and to such extent as provided to
other senior executive officers from time to time.  Initially, these
additional items are specified below:


 


(i)            A $500.00 per month car
allowance and reimbursement for use of a corporate cell phone, all in
accordance with Company policy.


 


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


 


3.             Grant of
Restricted Stock.  In further consideration of this Agreement,
the Company hereby awards to the Executive a total of 75,000 shares of common
stock, par value $.001 per share, of the Company (the “Common Stock”),
subject to the conditions and restrictions set forth below (the “Restricted Stock”).


 


(a)           Rights
Regarding Restricted Stock.  The Restricted Stock
issued to the Executive shall constitute issued and outstanding shares of the
Company’s Common Stock for all corporate purposes.  Except as provided by Section 3(b) below,
the Executive will have the right to (a) vote the Restricted Stock, (b) receive
and retain dividends and distributions, if any, that the Company designates,
pays and distributes generally with respect to its Common Stock and (c) exercise
all other rights, powers and privileges of a holder of Common Stock with
respect to such Restricted Stock.


 


(b)           Restrictions
on Restricted Stock.  Despite the above, the Executive’s
rights to fully enjoy the ownership of the Restricted Stock are subject to the
Executive’s vesting in the Restricted Stock as provided by Section 3(c) below. 
Pending such vesting, the Executive’s ownership of the Restricted Stock is
subject to the following:


 


(i)            Company
Retention of Unvested Restricted Stock.  When issuing the
Restricted Stock, the Company shall register the Restricted Stock in the name
of the Executive, but shall hold the stock certificate, together with a stock
power endorsed by the Executive in blank, pending vesting by the Executive in
all or a portion of the Restricted Stock.  If at the end or during the
four years from and after the date hereof (such period being the “Restricted Period”),
the Executive vests in all or a portion of the Restricted Stock, the Company
will promptly reissue a certificate representing the vested portion of the
Restricted Stock and deliver such certificate to the Executive.  Any such reissued certificate shall contain a
legend prohibiting sale or other transfer of the shares of Common Stock without


 


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registration under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption therefrom.


 


(ii)           Company
Retention of Dividends and Distributions on Unvested Restricted Stock.  In the event that the Company declares and
pays a dividend or other distribution on its Common Stock, the Company shall
retain custody of all such dividends and distributions (the “Retained Distributions”)
made or declared with respect to the unvested portion of the Restricted
Stock.  The Company is not required to
segregate the Retained Distributions in a separate or interest-bearing account,
but payment thereof by the Company upon vesting of the Restricted Stock shall
be a general, unsecured obligation of the Company.  If at the end or
during the Restricted Period, the Executive vests in all or a portion of the
Restricted Stock, the Company shall promptly pay or distribute to the Executive
(without any interest) the portion of the Retained Distributions held by the
Company that relate to the vested portion of the Restricted Stock.


 


(iii)          Restriction
on Transfer of Restricted Stock.  Except for a
transfer without consideration to a trust for the benefit of the Executive
and/or the Executive’s spouse and children (and then only if the trust agrees
to be bound by the restrictions of this Agreement on the Restricted Stock so
transferred), the Executive may not sell, assign, transfer, pledge, exchange,
encumber or dispose of the Restricted Stock or any Retained Distributions or
the Executive’s interest in any of them until vested therein.


 


(c)           Vesting of
Restricted Stock.  The Executive will vest in all or a portion of
the Restricted Stock (and the Retained Distributions, if any, related thereto),
as follows:


 


(i)            Service-Based
Vesting.  The Executive will vest in 50% of the
Restricted Stock (and the Retained Distributions, if any, related thereto) on
the second anniversary hereof if the Executive has been employed with the
Company continuously from the date hereof to such date.  The Executive will vest in an additional 25%
of the Restricted Stock (and the Retained Distributions, if any, related
thereto) on the third anniversary hereof if the Executive has been employed
with the Company continuously from the date hereof to such date.  The
Executive will vest in the last 25% of the Restricted Stock (and the Retained
Distributions, if any, related thereto) on the last date of the Restricted
Period if the Executive has been employed with the Company continuously from
the date hereof to such date.


 


(ii)           Vesting
Upon a Change of Control.  Subject to Section 5(f) below,
all of the Restricted Stock (and all Retained Distributions, if any) will vest
upon a Change of Control event (as defined below) that occurs during the Term
hereof, but only if (i) the Executive has been employed with the Company
continuously from the date hereof to the date of the Change of Control and (ii) the
Change of Control Price (as defined below) exceeds $3.93 (the closing price of
the Company’s Common Stock on the date hereof).  However, if the Change of
Control event is an event described in Section 3(c)(ii)(A)(2) below,
then (subject to Section 5(f) below) vesting under this Section 3(c)(ii) will
occur if the Executive has been employed with the Company continuously from the
date hereof to the date of the Change of Control, regardless of the Change of
Control Price.


 


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


 


(1)           An acquisition of
outstanding or newly issued Company


 


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securities that results in
any individual, entity or group within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1933, as amended (a “Person,” with such
Act being the “Exchange
Act”) having beneficial ownership within the meaning of Rule 13d-3
under the Exchange Act (“Beneficial
Ownership”) of more than 50% (other than any Person who, as of
the date hereof, already has Beneficial Ownership of at least 20%) of either (x) the
then outstanding shares of the Company’s Common Stock (the “Outstanding Company Common Stock”)
or (y) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting
Securities”); or


 


(2)           A change in the composition
of the Board in connection with a tender or exchange offer, a reorganization,
merger or consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of assets of another
corporation (a “Corporate
Transaction”) or a direct purchase of securities from the
Company such that (i) the individuals who, as of the date hereof, constitute
the members of the Board (the “Incumbent Board,” it being intended that the Executive
is not considered a member of the Incumbent Board at the date hereof) cease to
constitute at least a majority of the Board or (ii) a majority of the
individuals who, as of the date hereof, constitute the Incumbent Board resign
or are removed from the Board;  provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents; or


 


(3)           The approval by the
shareholders of the Company of a Corporate Transaction or, if consummation of
such Corporate Transaction is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by
consummation);  excluding, however, such a Corporate Transaction pursuant
to which (1) all or substantially all of the Beneficial Owners of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Corporate Transaction will Beneficially Own, directly or
indirectly, more than 50% of the outstanding shares of common stock, or more
than 50% of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, of the company
resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (2) no
Person (other than the Company, any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or such corporation resulting from such Corporate Transaction) will
Beneficially Own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction and (3) individuals who were
members of the Incumbent Board will constitute at least a majority of the board
of directors of the corporation resulting from such Corporate
Transaction;  or


 


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(4)           The approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company.


 


Despite
all of the foregoing, no Change in Control is deemed to have occurred with
respect to the Executive if the Executive is part of a purchasing group which
consummates the Change in Control transaction. 
The Executive is deemed “part of a purchasing group” for purposes of the
preceding sentence if the Executive is an equity participant in the purchasing
company or group except for (i) passive ownership of less than three percent
(3%) of the stock of the purchasing company or (ii) ownership of an equity
participation in the purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a majority of the
Incumbent Board.


 


(B)           Change of
Control Price.  “Change of
Control Price” means the higher of (i) the highest reported
closing price of a share of Common Stock in any transaction reported on the
Nasdaq Stock Market during the 30-day period prior to and including the date of
a Change of Control or (ii) if the Change of Control is the result of a
tender or exchange offer, a Corporate Transaction or a direct purchase of
securities from the Company, the highest price per share of Common Stock paid
in such tender or exchange offer, Corporate Transaction or direct purchase of
securities.


 


If
the Change of Control is the result of a direct purchase of securities from the
Company for a consideration consisting in whole or in part other than cash,
then:


 


(i)            insofar as the purchase
consideration consists of securities and the value of such securities is not
determinable by reference to a separate agreement, (A) if the securities
are then traded on a national securities exchange or the Nasdaq Stock Market
(or a similar national quotation system), then the value shall be computed
based on the average of the closing prices of the securities on such exchange
or system over the thirty (30)-day period ending on the date of receipt by the
Company, (B) if the securities are actively traded over-the-counter, then
the value shall be computed based on the average of the closing bid prices over
the thirty (30) day ending on the date of receipt by the Company and (C) if
there is no active public market, then the value shall be computed based on the
fair market value thereof on the date of receipt by the Company, as determined
in good faith by the Board and


 


(ii)           insofar as the purchase
consideration consists of property other than cash and securities, then the
value shall be computed at the fair market value thereof at the time of such
issuance, as determined in good faith by the Board.


 


(d)           Effect of
Termination of Service.  In the event the
Executive’s employment with the Company ceases for any reason whatsoever
(except upon a Change of Control), all Restricted Stock awarded to the
Executive (and the related Retained Distributions, if any) that has not
previously vested shall be forfeited as of the date of such termination.


 


(e)           Other
Cancellation of Unvested Restricted Stock and Retained Distributions.  The Company will cancel any Restricted Stock
and Retained Distributions that the Executive has not vested in by the last day
of the Restricted Period.  In addition, if the Compensation Committee
determines that the Executive has materially breached any of the provisions,
restrictions, terms or conditions of this Agreement or as established by the
Compensation Committee with respect to any Restricted Stock or Retained
Distributions, the Executive will forfeit all then Beneficially Owned
Restricted Stock and Retained Distributions.


 


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(f)            No Code Section 83(b) Election.  The
Executive shall not make an election, under Section 83(b) of the
Internal Revenue Code of 1986, as amended (the “Code”), to include an amount in income
in respect of the Restricted Stock.


 


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(g)           Non-Alienation
of Benefits.  Other than pursuant to a qualified domestic
relations order, no right or benefit under this Section 3 shall be subject
to transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or
charge, whether voluntary, involuntary or by operation of law, and any attempt
to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the
same shall be void.


 


(h)           Subscription
Representations;  Transfer Restrictions.  The Executive
understands that the Restricted Stock constitutes “restricted securities”
within the meaning of the Securities Act.  Accordingly, even if the
Executive is fully vested in the Restricted Stock, the Executive may never be
able to resell the underlying shares for a profit, or at all.  In any
event, the Executive will be able to resell or otherwise transfer the
Restricted Stock only if the sale or other transfer is registered under the
Securities Act and applicable state securities laws or there is an available
exemption from this registration.  The Executive confirms that the
Executive can bear the loss of the Executive’s entire investment in the
Company.


 


(i)            Lock-Up
Agreement.  The Executive agrees that, in the event of
each future public offering of the Company’s equity securities (an “Offering”), the
Executive will agree to such restrictions on the resale of any shares of the
Company’s Common Stock (including the Restricted Stock) then beneficially owned
by Executive as requested by the managing underwriter or underwriters of the
Offering;  provided, however, that such restrictions run no longer than
the period of resale restriction imposed by such underwriters on the Company’s
other executive officers and directors.  The Executive agrees not to sell
or otherwise transfer (including upon death) any of the shares of Common Stock
(including the shares of Restricted Stock) beneficially owned by the Executive,
unless the purchaser or recipient agrees in writing to be bound by the
foregoing lock-up agreement.


 


(j)            Stock
Certificate Restrictions.  The Executive acknowledges that the Company
will place a restrictive legend on any certificate representing the Restricted
Stock, and a “stop transfer order” with any transfer agent of the Company’s
securities, barring the sale or other transfer of such shares except in
compliance with this Agreement and without registration under the Securities
Act or an exemption therefrom, and noting the existence of the lock-up agreement
above.


 


(k)           Future
Grants of Equity Securities.  Future grants of
restricted stock, stock options or other equity securities, if any, will be
governed by the terms of the grant agreement to which the future grant relates,
and not by this Agreement.


 


4.             Non-Competition
and Non-Solicitation.


 


(a)           Basic Terms.  In consideration of this Agreement (including
the Restricted Stock grant hereunder), the Executive will not, during the
period of the Executive’s employment with the Company and for a period of one (1) year
immediately following the termination of the Executive’s employment under this
Agreement, for any reason whatsoever, directly or indirectly, for the Executive
or on behalf of or in conjunction with any other person, firm, entity, company,
business, partnership, corporation, limited liability company or limited
liability partnership of whatever nature:


 


(i)            engage, as an officer,
director, shareholder, owner, partner, joint venturer or in a managerial
capacity, whether as an employee, independent contractor, consultant or advisor
or as a sales representative or executive, in any business that, at the date of
the Executive’s termination of


 


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employment, manufactures,
markets and/or sells hardware and/or software products and/or services in
competition with the Company in the United States;


 


(ii)           recruit, solicit, hire or
induce, or attempt to recruit, hire or induce, any employee or employees to
terminate employment or otherwise cease his, her or their relationship with the
Company;


 


(iii)          solicit, divert or take
away, or attempt to solicit, divert or to take away, the data storage hardware
and/or software products and/or services business or patronage of any of the
Company’s actual or prospective clients, customers or accounts contracted,
solicited or served by the Company during Executive’s employment; or


 


(iv)          call upon or solicit any
prospective acquisition candidate or individual or groups of employees of other
organizations, which, to the Executive’s actual knowledge after due inquiry,
the Company has called upon or for which the Company has made an acquisition or
hiring analysis, for the purpose of acquiring such entity or its assets or
hiring such individuals.


 


Notwithstanding the above,
the Executive may acquire as a passive investment not more than three percent
(3%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.


 


(b)           Equitable
Relief.  Because of
the difficulty of measuring economic losses to the Company as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to the Company for which it would have no other
adequate remedy, the Executive agrees that the foregoing covenants may be
enforced by the Company in the event of breach by the Executive by injunctions
and restraining orders.


 


(c)           Severability
and/or Reformation.  The
covenants in this Section 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant.  Moreover, in the event any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall be reformed in accordance therewith.


 


(d)           Independently
Enforceable.  All of the
covenants in this Section 4 shall be construed as an agreement independent
of any other provision in this Agreement, and the existence of any claim or
cause of action of the Executive against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of such covenants.  It is specifically agreed that the
period of one (1) year following termination of employment stated at the
beginning of this Section 4, during which the agreements and covenants of
the Executive made in this Section 4 shall be effective, shall be computed
by excluding from such computation any time during which the Executive is in
violation of any provision of this Section 4.


 


5.             Term;
Termination; Rights on Termination.


 


The
term of Executive’s employment under this Agreement (the “Term”) begins on the
date hereof and continues through the earlier to occur of (i) the second
anniversary of the date hereof or (ii) the first day of the month next
following the Executive’s 65th birthday (the “Normal Retirement Date”);


 


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provided, however, that on
the second anniversary of the date hereof, and on each successive second
anniversary thereafter (such date and each second anniversary thereof shall be
hereinafter referred to as the “Renewal Date”), the Term will automatically extend so
as to terminate on the earlier of (x) two years from such Renewal Date or (y) the
Executive’s Normal Retirement Date, unless at least 90 days prior to the
Renewal Date, the Company gives written notice to the Executive that the
Company is not extending the Term.  Despite the Term, this Agreement and
the Executive’s employment may be terminated in any one of the following ways:


 


(a)           Termination
Upon Death.  The
Executive’s death will immediately terminate this Agreement.  The Company
will pay the Executive’s estate any of Executive’s accrued base salary and any
earned, but unpaid, Annual Bonus through the date of termination and at the
time otherwise payable under this Agreement (i.e., after the end of the applicable
service period provided it is earned and on a prorated basis) and reimbursement
of expenses.  The Executive’s estate will forfeit any Restricted Stock
(and the related Retained Distributions) not vested in the Executive as of the
date of the Executive’s death.


 


(b)           Termination
on Account of Disability.  If, as a result of
incapacity due to physical or mental illness or injury, as reasonably
determined by the Executive’s physician, the Executive is absent from the
Executive’s full-time duties hereunder for ninety (90) days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such 90-day period, but which will not be effective earlier than the
last day of such 90-day period), the Company may terminate the Executive’s
employment hereunder;  provided that the Executive is unable to resume the
Executive’s full-time duties at the conclusion of such notice period.  The
Company will pay the Executive any of the Executive’s accrued base salary and any
earned, but unpaid, Annual Bonus through the date of termination and at the
time otherwise payable under this Agreement (i.e., after the end of the
applicable service period provide it is earned and on a prorated basis) and
reimbursement of expenses.  The Executive will forfeit any Restricted
Stock (and the related Retained Distributions) not vested as of the date of
termination.  For a period of 18 months following the date of termination,
the Company will make available to the Executive and the Executive’s eligible
family members, at the Executive’s sole expense, health insurance continuation
coverage pursuant to Section 4980B of the Code, Sections 601-608 of the
Employee Retirement Income Security Act of 1974, as amended, and under any
other applicable law, to the extent required by such laws (“COBRA Coverage”).


 


(c)           Termination
by the Company for Cause.  The Company may
terminate this Agreement at any time for Cause upon written notice to the
Executive.  For purposes of this Agreement, “Cause” is (i) the Executive’s
willful, material and irreparable breach of this Agreement;  (ii) the
Executive’s gross negligence in the performance or intentional nonperformance
(continuing for thirty (30) days after receipt of written notice of need to
cure) of any of the Executive’s material duties and responsibilities under this
Agreement;  (iii) the Executive’s willful dishonesty, fraud or
misconduct with respect to the business or affairs of the Company;  or (iv) the Executive’s conviction of a
felony crime.  Upon any termination for
Cause, the Executive will only receive base salary accrued through the date of
termination and reimbursement of expenses and no other compensation or
bonus.  The Executive will forfeit any Restricted Stock (and the related
Retained Distributions) not vested as of the date of termination and any Annual
Bonus.  Without limiting the scope of Section 3(e) above,
the Compensation Committee also may deem the Executive’s termination for Cause
as a reason pursuant to Section 3(e) for the Executive’s forfeiture
of all vested shares of Restricted Stock (and any related Retained
Distributions) then Beneficially Owned by the Executive.  For a period of 18 months following the date
of termination, the Company will make COBRA Coverage available to the Executive
and the Executive’s eligible family


 


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members, at the Executive’s
sole expense.


 


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(d)                                 Termination by the Company Without Cause or by the Executive for Good
Reason.  At any
time, either the Executive or the Company may terminate this Agreement and the
Executive’s employment, effective thirty (30) days after written notice is
provided to the other.  If the Company terminates the Executive’s
employment without Cause or if the Executive resigns employment for Good Reason
(as defined below), the Executive will receive from the Company, subject to Section 5(f) below,
(i) any base salary accrued through the date of termination and
reimbursement of expenses, (ii) any earned, but unpaid, Annual Bonus
through the date of termination and at the time otherwise payable under this
Agreement (i.e., after the end of the applicable service period provided it is
earned and on a prorated basis) and reimbursement of expenses, and (iii) a
single, lump sum severance payment equal to one year of the Executive’s base
salary.  If Executive voluntarily resigns, Executive will receive only the
amounts set forth in (i) and (ii) in the preceeding sentence, on the
same terms and conditions stated therein, with no severance payment. If the
Company terminates the Executive’s employment without Cause or if the Executive
resigns employment for Good Reason, the Executive will vest fully in any
Restricted Stock (and the related Retained Distributions) not otherwise vested
as of the date of termination. For a period of 18 months following the date of
termination, the Company will make COBRA Coverage available to the Executive and
the Executive’s eligible family members.  Subject to Section 5(f) below,
the Company will directly pay, or will reimburse the Executive for, the first
one year of premiums for the COBRA Coverage.  However, if the Executive
becomes re-employed with another employer and is eligible to receive any health
insurance benefits under another employer’s plans, the Company’s obligations to
pay or reimburse for medical and dental insurance benefits under this Section 5(d) shall
terminate.  COBRA Coverage extending
beyond the first year after the Executive’s date of termination will be at the
Executive’s sole expense.


 


For purposes of this
Agreement, each of the following is a “Good Reason” for the Executive to terminate
employment with the Company:  (i) the Company’s imposition of
material and adverse changes, without the Executive’s consent, in the Executive’s
principal duties (including upon a Change of Control);  (ii) the
Company’s move (including upon a Change of Control) of the Company’s Colorado
office (out of which the Executive is based) more than 50 miles from its
current location without the Executive’s consent;  and (iii) the
reduction by the Company (including upon a Change of Control) in the Executive’s
base salary without the Executive’s consent by more than the weighted average
percentage reduction made contemporaneously by the Company of the base salaries
all other executive officers.  Despite the foregoing, if within the 30-day
period after receiving the Executive’s notice of intent to terminate employment
on account of Good Reason, the Company corrects the deficiency giving rise to
such notice, a subsequent resignation by the Executive will not constitute a
termination for Good Reason (without a new event giving rise therefor).


 


(e)                                  Termination in Connection with a Change of Control.  Notwithstanding the other provisions of this Section 5,
if during the Term of this Agreement, (x) the Company terminates the
Executive’s employment in anticipation of, in connection with, at the time of
or within ninety (90) days after a Change of Control or (y) the Executive
resigns employment with the Company for Good Reason arising in anticipation of,
in connection with, at the time of or within ninety (90) days after a Change of
Control, the Executive will receive from the Company, subject to Section 5(f) below,
(i) any base salary accrued through the date of termination and
reimbursement of expenses, (ii) any earned, but unpaid, Annual Bonus
through the date of termination and at the time otherwise payable under this Agreement
(i.e., after the end of the applicable service period provided it is earned and
on a prorated basis) and reimbursement of expenses, and (iii) a single,
lump sum severance payment equal to one year of the Executive’s base
salary.  Subject to Section 5(f) below, the Executive also will
vest in all then unvested


 


11

















 


Restricted Stock (and the
related Retained Distributions) to the extent provided by Section 3(c)(ii) above. 
For a period of 18 months following the date of termination, the Company will
make COBRA Coverage available to the Executive and the Executive’s eligible
family members.  Subject to Section 5(f) below, the Company will
directly pay, or will reimburse the Executive for, the first one year of
premiums for the COBRA Coverage.  However, if the Executive becomes
re-employed with another employer and is eligible to receive any health
insurance benefits under another employer’s plans, the Company’s obligations to
pay or reimburse for medical and dental insurance benefits under this Section 5(e) shall
terminate.  COBRA Coverage extending
beyond the first year after the Executive’s date of termination will be at the
Executive’s sole expense.


 


(f)                                    Prerequisites to Severance Benefits;  Timing of Cash Payments.  The Company’s obligations to make cash
payments, and the vesting of Restricted Stock (and the related Retained
Distributions), under this Section 5 are subject to the following:


 


(i)                                     the Executive
must execute and deliver to the Company a release in the form attached as Exhibit A
(the “Release”)
and must not revoke it and


 


(ii)                                  the Executive
must continuously comply with the provisions of this Agreement (including the
non-competition and non-solicitation provisions of Section 4 above).


 


The Company will pay the
lump sum cash severance amounts under Section 5(d) or 5(e) above
on the first day of the month following the Executive’s date of termination
(or, if later, five business days after expiration of any period for revocation
under the Release).


 


6.                                       Tax Withholdings.  The Company may
withhold from any amounts payable under this Agreement such federal, state,
local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.  The Executive may satisfy withholding
obligations relating to the vesting of Restricted Stock by instructing the
Company to retain and cancel a number of shares of Common Stock having a Market
Price on the date of termination (or as of the immediately preceding business
day if the date of termination is not a business day) equal to the withholding
tax obligation amount.  The term “Market Price” with respect to shares of
Common Stock means the closing price on the Nasdaq Stock Market or, if none,
the average of the last reported closing bid and asked prices on any other
national or regional securities exchange or as quoted in the National
Association of Securities Dealers, Inc.’s Automated Quotations System (“Nasdaq”),
or if not listed on a national or regional securities exchange or quoted in
Nasdaq, the closing price as reported by bigcharts.com (or if this service is
discontinued, such other reporting service acceptable to the Company), or if no
quotations in such Common Stock are available, the fair market value of the
shares as determined in good faith by the Board.


 


7.                                       Reduction to Avoid Excise Tax.  If any payment or
distribution to or for the benefit of the Executive (whether paid or payable or
distributed or distributable) pursuant to the terms of this Agreement or
otherwise (a “Payment”)
would constitute a “parachute payment” within the meaning of Section 280G
of the Code, the Payment shall be reduced to the extent necessary so that no
portion of the Payment is subject to the excise tax imposed by Section 4999
of the Code, together with any interest or penalties imposed with respect to
such excise tax, but only if, by reason of such reduction, the net after-tax
benefit to the Executive shall equal or exceed the net after-tax benefit to the
Executive if no reduction was made.  Subject to the next paragraph, the
Company shall afford the Executive an opportunity to select a reduction of cash
or non-cash items, or a combination of both, to reduce the excess Payment.


 


12

















 


All determinations required
to be made under this Section 7, including whether a reduction of any
Payment is required and the assumptions to be utilized in arriving at such
determination, shall be made by the Company’s independent registered public
accountants serving immediately prior to the Change in Control, or such other
nationally recognized accounting firm as may be agreed by the Company and the
Executive (the “Accounting
Firm”);  provided, that the Accounting Firm’s determination
shall be made based upon “substantial authority” within the meaning of Section 6662
of the Code.  Any determination by the Accounting Firm hereunder shall be
binding upon the Company and the Executive.


 


8.                                       Return of Company Property.  All records, designs, trade names and
trademarks, service names and service marks, patents, business plans, financial
statements, manuals, memoranda, customer and other lists and other property
delivered to or compiled by the Executive by or on behalf of the Company, or
its representatives, vendors or customers which pertain to the business of the
Company are and will remain the property of the Company, and be subject at all
times to its discretion and control.  Likewise, all correspondence,
reports, records, charts, advertising and marketing materials and other similar
data pertaining to the business, activities or future plans of the Company
which is collected by or in the possession of the Executive shall be delivered
promptly to the Company without request by it upon termination of the Executive’s
employment.  Further, upon any termination of employment, the Executive
shall return any Company computer (without deleting or tampering with
information thereon) and any other physical property of the Company.


 


9.                                       Inventions.  The Executive will disclose promptly to the
Company any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by the Executive, solely or jointly with another, during the
period of employment, and which are directly related to the business or
activities of the Company and which the Executive conceives as a result of the
Executive’s employment by the Company.  The Executive hereby assigns and
agrees to assign all of the Executive’s interests therein to the Company or its
nominee.  Whenever requested to do so by the Company, the Executive will
execute any and all applications, assignments or other instruments that the
Company shall deem necessary to apply for and obtain letters patent of the United
States or any foreign country or to otherwise protect the Company’s interest
therein.  Nothing in this Agreement shall apply to an invention for which
no equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Executive’s own time and (i) which
does not relate (a) directly to the business of the Company or (b) to
the Company’s actual or demonstrably anticipated research or development or (ii) which
does not result from any work performed by the Executive for the Company.


 


10.                                 Confidentiality.  In consideration of this Agreement,
the Executive agrees to not at any time use or, other than as required by court
order, disclose, or permit use or disclosure of, any of the Company’s
confidential information or trade secrets.  This includes all knowledge
and information that Executive acquires during employment with the Company
which relates to the business, developments, activities, products and services
or financial affairs of the Company or any individual or firm that is engaged
in or has done business with the Company.  This also includes any
information or compilation of information that derives independent economic
value from not being generally known or readily ascertainable by proper means
by other persons and which relates to any aspect of the Company’s business,
including, but not limited to:  trade secrets within the meaning of the
Minnesota Trade Secrets Act, customer lists, customer information, costs and
selling prices, payment and credit information, customer profiles and analysis,
prospect tracking recording, financial information, budget and financial plans,
costing, pricing, billing information, tax data, sales and marketing
information, business strategies and plans, technical 


 


13

















 


information including
software, research, product/product development information, personnel
information such as salaries, phone numbers, titles, benefits, bonuses,
employment histories, shareholder information and stock data and any
discoveries, inventions, ideas, methods, products, equipment, developments,
improvements or programs which the Company holds confidential and has not
publicly disclosed.  Despite the above, the Executive is not obliged to
maintain the confidentiality of information that is or becomes public other
than as a result of acts by or through the Executive or that the Executive
independently obtains from a third party having no duty of confidentiality to
the Company.


 


11.                                 Indemnification;  Directors’ and Officers’ Insurance.  The
Executive shall have the benefit of indemnification to the fullest extent
permitted by applicable law, which indemnification shall continue after the
termination of this Agreement for such period as may be necessary to continue
to indemnify Executive for acts or omissions during the Term hereof to the
fullest extent permitted by applicable law.


 


12.                                 Code Section 409A.  To the extent applicable and notwithstanding
any other provision of this Agreement, this Agreement and the Restricted Stock
and other payments and benefits hereunder shall be administered, operated and
interpreted in accordance with Code Section 409A and Department of
Treasury regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other guidance that may be
issued after the date of this Agreement; 
provided, however, in the event that the Compensation Committee
determines that any amounts payable hereunder may be taxable to the Executive
under Code Section 409A and related Department of Treasury guidance prior
to the payment and/or delivery to the Executive of such amount, the Company may
(a) adopt such amendments to this Agreement and the related Restricted
Stock or other payments and benefits hereunder, and appropriate policies and
procedures, including amendments and policies with retroactive effect, that the
Compensation Committee determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement and/or (b) take
such other actions as the Compensation Committee determines necessary or
appropriate to comply with or exempt this Agreement and the Restricted Stock
and other payments and benefits hereunder from the requirements of Code Section 409A
and related Department of Treasury guidance, including such Department of
Treasury guidance and other interpretive materials as may be issued after the
date of this Agreement.  The Company
makes no guarantees to the Executive regarding the tax treatment of this Agreement
and, notwithstanding the above provisions and any agreement or understanding to
the contrary, if any stock, payments or other amounts due to the Executive (or
his beneficiaries, as applicable) results in, or causes in any manner, the
application of an accelerated or additional tax, fine or penalty under Code Section 409A
or otherwise to be imposed, then the Executive (or his beneficiaries, as
applicable) shall be solely liable for the payment of, and the Company shall
have no obligation or liability to pay or reimburse (either directly or
otherwise) the Executive (or his beneficiaries, as applicable) for, any such
additional taxes, fines or penalties.


 


13.                                 Complete Agreement.  This Agreement
supersedes any other agreements or understandings, written or oral, between the
Company and the Executive, and the Executive has no oral representations,
understandings or agreements with the Company or any of its officers,
directors, employees or representatives covering the same subject matter as
this Agreement.  This document is the final, complete and exclusive
statement and expression of the agreement between the Company and the Executive
and of all the terms of this Agreement, and it cannot be varied, contradicted
or supplemented by evidence of any prior or contemporaneous oral or written
agreements.  This document may not be later modified except by a written
instrument signed by a duly authorized officer of the Company and the
Executive, and no term of this Agreement may be waived except by a written
instrument signed by the party waiving the benefit of such term.


 


14

















 


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


 


	
  To the Company:

  	
  Datalink Corporation

  
	
   

  	
  8170 Upland Circle

  
	
   

  	
  Chanhassen, Minnesota
  55317

  
	
   

  	
  Attention: Paul F. Lidsky,
  President and Chief Executive Officer

  
	
   

  	
   

  
	
  To the Executive:

  	
  M. Shawn O’Grady

  
	
   

  	
  8428 Firethorn Court

  
	
   

  	
  Niwot, Colorado  80503

  



 


Notice is given and
effective three (3) days after the deposit in the U.S. mail of a writing
addressed as above and sent first class mail, certified, return receipt
requested, or when actually received.  Either party may change the address
for notice by notifying the other party of such change in accordance with this Section 13.


 


15.                                 Arbitration. 
Except as to matters of injunctive or equitable relief (over which the
parties agree that the federal and state courts located in Minneapolis,
Minnesota will have exclusive jurisdiction and are deemed to be of proper venue
and convenience to the parties), any unresolved dispute or controversy arising
under or in connection with this Agreement will be settled exclusively by
arbitration, conducted before a panel of three (3) arbitrators in
Minneapolis, Minnesota, in accordance with the rules of the American
Arbitration Association then in effect. 
The arbitrators will not have the authority to add to, detract from or
modify any provision hereof nor to award punitive damages to any injured
party.  A decision by a majority of the arbitration panel will be final
and binding.  Judgment may be entered on the arbitrators’ award in any
court having jurisdiction.  The direct expense of any arbitration
proceedings, including, but not limited to, the administrative fees and the
arbitrators’ fees and expenses, will be borne by the Company.


 


16.                                 Binding Effect;  Governing Law.  This Agreement will inure to the benefit of
the successors or assigns of the Company.  This Agreement shall be
governed by and construed in accordance with the laws of the State of
Minnesota, exclusive of its conflicts of laws rules.


 


IN WITNESS
WHEREOF, the undersigned have hereunto affixed their signatures.


 


	
  DATALINK
  CORPORATION

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Paul F. Lidsky

  	
   

  	
  /s/ M. Shawn O’Grady

  
	
   

  	
  Paul
  F. Lidsky, President and Chief Executive Officer

  	
   

  	
  M. Shawn O’Grady

  



 


15

















 


Exhibit A


 


Release of Claims


 


I release Datalink
Corporation and its officers, directors, employees and agents from any claim,
cause of action, damages or expenses, including attorneys’ fees, arising out of
the relationship between the parties through the signing of this Release. 
This is intended to be a complete release of claims by me, whether the claims
are known or unknown, matured or unmatured or fixed or contingent. 
Therefore, by this release I GIVE UP ANY
RIGHT TO MAKE A CLAIM, BRING A LAWSUIT, FILE AN ADMINISTRATIVE CHARGE OF
DISCRIMINATION OR OTHERWISE SEEK MONEY DAMAGES OR COURT ORDERS AS A RESULT OF
MY EMPLOYMENT BY DATALINK, OR OF MY SEPARATION FROM EMPLOYMENT WITH DATALINK. 
I acknowledge and intend that this Release cover claims of wrongful
termination, defamation, intentional infliction of emotional distress, any
claims under the Federal Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, the Americans With Disabilities Act, the Minnesota
Human Rights Act and Minnesota Statute Section 181.81 (which prohibits age
discrimination) and any other state or federal statutes prohibiting
discrimination in employment.  This Release also binds my heirs,
administrators, representatives, executors, successors and assigns.  I
have been advised by my legal counsel of the effect of this Release. 
Despite the above, this Release does not apply to claims against Datalink for
breaching its obligations under an Employment Agreement dated December 17,
2009.


 


NOTICE TO THE UNDERSIGNED:


 


THIS IS A RELEASE OF LEGAL
RIGHTS YOU MAY HAVE.  YOU SHOULD CONSULT WITH AN ATTORNEY REGARDING
THIS RELEASE AND OTHER ASPECTS OF THIS LETTER BEFORE YOU SIGN IT.


 


YOU HAVE 21 DAYS TO CONSIDER
WHETHER OR NOT TO SIGN THIS RELEASE, STARTING FROM THE DATE YOU FIRST RECEIVE A
COPY OF IT.  YOU MAY SIGN THIS RELEASE AT ANY TIME DURING THE 21-DAY
PERIOD.


 


YOUR EMPLOYMENT BY DATALINK
HAS TERMINATED.  YOUR ACCEPTANCE OR FAILURE TO ACCEPT THIS RELEASE DOES
NOT AFFECT YOUR TERMINATION.  IF YOU DO NOT ACCEPT THIS RELEASE, OR IF YOU
REVOKE YOUR ACCEPTANCE OF IT, DATALINK WILL NOT PROVIDE YOU THE SEVERANCE PAY
AND OTHER BENEFITS DESCRIBED IN YOUR EMPLOYMENT AGREEMENT.


 


AFTER YOU ACCEPT THIS
RELEASE BY SIGNING IT, YOU MAY REVOKE YOUR ACCEPTANCE FOR A PERIOD OF 15
DAYS AFTER THE DATE YOU SIGN.  THIS RELEASE IS NOT EFFECTIVE UNTIL THIS
15-DAY REVOCATION PERIOD EXPIRES.


 


IF YOU WISH TO REVOKE YOUR
ACCEPTANCE OF THIS RELEASE, YOU MUST NOTIFY DATALINK IN WRITING WITHIN THE
15-DAY REVOCATION PERIOD.  YOU MUST DELIVER YOUR NOTICE TO DATALINK IN
PERSON OR BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO:  Paul
F. Lidsky, President and Chief Executive Officer, Datalink Corporation, 8170
Upland Circle, Chanhassen, Minnesota  55317.


 


16

















 


IF YOU FAIL TO PROPERLY
DELIVER OR MAIL YOUR WRITTEN REVOCATION AS INSTRUCTED, YOUR REVOCATION WILL NOT
BE EFFECTIVE.


 


	
  Date this Release is first
  given by Datalink to the undersigned:

  	
   

  
	
   

  	
   

  
	
  Agreed to
  and accepted by the undersigned:

  	
   

  
	
   

  	
   

  
	
  Date this Release is
  signed by the undersigned:

  

  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Employee

  



 


17