Document:

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EXHIBIT

10.4

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Joe A. Rose)

 

This Employment

Agreement (the “Agreement”) by and between SOURCECORP,

Incorporated, a Delaware corporation, and SOURCECORP Management, L.P., a Texas limited partnership and

indirect wholly owned subsidiary of SOURCECORP,

Incorporated (collectively, the “Company”), and Joe A. Rose (“Employee”) is

hereby entered into and effective as of May 10, 2002.  This Agreement hereby supersedes any other employment agreements

or understandings, written or oral, between the Company and Employee.

 

R E C I T A L S

 

The following

statements are true and correct:

 

As of the date of

this Agreement, the Company is engaged primarily in the business of providing

document and information management outsourcing solutions.

 

Employee is

employed hereunder by the Company in a confidential relationship wherein

Employee, in the course of his employment with the Company, has and will

continue to become familiar with and aware of information as to the Company’s

customers, specific manner of doing business, including the processes,

techniques and trade secrets utilized by the Company, and future plans with

respect thereto, all of which has been and will be established and maintained

at great expense to the Company; this information is a trade secret and

constitutes the valuable goodwill of the Company.  In consideration for Employee’s promises herein, the Company

agrees to provide Employee with such confidential information; in return,

Employee recognizes and acknowledges that such information must be maintained

in confidence, and to further such protection agrees to the provisions of

Section 3 of this Agreement.

 

Therefore, in

consideration of the mutual promises, terms, covenants and conditions set forth

herein and the performance of each, it is hereby agreed as follows:

 

A G R E E M E N T

S

 

1.             Employment and Duties.

 

(a)           The Company hereby employs Employee

as Executive Vice President and Chief Operating Officer.  As such, Employee shall have

responsibilities, duties and authority reasonably accorded to and expected of a

Executive Vice President and Chief Operating Officer.  Employee hereby accepts this employment upon the terms and

conditions herein contained and, subject to Section 1(b), agrees to devote his

working time, attention and efforts to promote and further the business of the

Company.

 

(b)           Employee shall not, during the term

of his employment hereunder, be engaged in any other business activity pursued

for gain, profit or other pecuniary advantage except to the extent that such

activity (i) does not interfere with Employee’s duties and responsibilities

hereunder and (ii) does not violate Section 3 hereof.  The foregoing limitations shall not be

 

 

construed as prohibiting Employee from

(A) serving on the boards of directors of other companies or

(B) making personal investments in such form or manner as will neither

require his services, other than to a minimal extent, in the operation or

affairs of the companies or enterprises in which such investments are made nor

violate the terms of Section 3 hereof.

 

2.             Compensation.  For all services rendered by Employee, the

Company shall compensate Employee as follows:

 

(a)           Base Salary.  The base salary payable to Employee shall be $365,000 per year,

payable on a regular basis in accordance with the Company’s standard payroll

procedures but not less than bi-weekly. 

On at least an annual basis, the Board of Directors of the Company (the

“Board”) will review Employee’s performance and may make increases to such base

salary if, in its discretion, any such increase is warranted. Such recommended

increase would, in all likelihood, require approval by the Board or a duly

constituted committee thereof.

 

(b)           Incentive Bonus Plan.  Employee shall be eligible for a bonus

opportunity of up to 80% of his annual base salary in accordance with the

Company’s Incentive Bonus Plan as modified from time to time, payable in cash

and/or equity of the Company (at the Company’s discretion).  The bonus payment and the Company’s targeted

performance shall be determined and approved by the Board or the compensation

committee thereof.  Employee has already

been awarded a bonus option potentially in lieu of any 2002 bonus opportunity.

 

(c)           Executive Perquisites, Benefits and Other

Compensation.  Employee shall

be entitled to receive additional benefits and compensation from the Company in

such form and to such extent as specified below:

 

(i)            Payment of all premiums for coverage

for Employee and his dependent family members under health, hospitalization,

disability, dental, life and other insurance plans that the Company may have in

effect from time to time, and not less favorable than the benefits provided to

other Company executives.

 

(ii)           Reimbursement for all business travel

and other out-of-pocket expenses reasonably incurred by Employee in the

performance of his services pursuant to this Agreement.  All reimbursable expenses shall be

appropriately documented in reasonable detail by Employee upon submission of

any request for reimbursement, and in a format and manner consistent with the

Company’s expense reporting policy.

 

(iii)          Four (4) weeks paid vacation for each

year during the period of employment or such greater amount as may be afforded

officers and key employees generally under the Company’s policies in effect

from time to time (prorated for any year in which Employee is employed for less

than the full year).

 

(iv)          An automobile allowance in the amount

of $1,000 per month.

 

(v)           The Company shall provide Employee

with other executive perquisites as may be available to or deemed appropriate

for Employee by the Board and participation in all other Company-wide employee

benefits as available from time to time, which will include participation in

the Company’s Incentive Compensation Plan.

 

2

 

(vi)          Participation in the Company’s 401(k)

Plan and Non-Qualified Plan.

 

(vii)         The Company shall reimburse Employee up

to $8,000 per year for expenditures on health costs, insurance, financial

planning or tax planning benefits (or similar benefits, or such other benefits

at the discretion of the Company) or club dues, all as selected by Employee.

 

3.             Non-Competition Agreement.

 

(a)           Subject to Sections 5(d) and (f) and

Section 12, Employee will not, during the period of his employment by or with

the Company, and for a period of two (2) years immediately following the

termination of his employment with the Company, for any reason whatsoever,

directly or indirectly, for himself or on behalf of or in conjunction with any

other person, company, partnership, corporation, business or entity of whatever

nature:

 

(i)            engage, as an officer, director,

shareholder, owner, partner, joint venturer, or in a managerial capacity,

whether as an employee, independent contractor, consultant or advisor, or as a

sales representative, in any business selling any products or services in

direct competition with the Company, within 100 miles of (i) the principal

executive offices of the Company or (ii) any place to which the Company provides

products or services or in which the Company (including the subsidiaries

thereof) is in the process of initiating business operations during the term of

this covenant (the “Territory”);

 

(ii)           call upon any person who is, at that

time, within the Territory, an employee of the Company (including the

subsidiaries thereof) in a managerial capacity for the purpose or with the

intent of enticing such employee away from or out of the employ of the Company

(including the subsidiaries thereof), provided that Employee shall be permitted

to call upon and hire any member of his immediate family;

 

(iii)          call upon any person or entity which

is, at that time, or which has been, within one (1) year prior to that time, a

customer of the Company (including the subsidiaries thereof) within the

Territory for the purpose of soliciting or selling products or services in

direct competition with the Company within the Territory;

 

(iv)          call upon any prospective acquisition

candidate, on Employee’s own behalf or on behalf of any competitor, which

candidate was either called upon by the Company (including the subsidiaries

thereof) or for which the Company made an acquisition analysis, for the purpose

of acquiring such entity; or

 

(v)           disclose customers, whether in

existence or proposed, of the Company (or the subsidiaries thereof) to any

person, firm, partnership, corporation or business for any reason or purpose

whatsoever.

 

As used in

Section 3(a), references to the business, customers, Territory, etc. of

the Company refer to the status of the Company prior to any Change in Control (i.e., such breadth of business, customers,

Territory, etc. shall not automatically be expanded to include those of a

successor to the Company resulting from a Change in Control).  Notwithstanding the above, the

 

3

 

foregoing covenant shall

not be deemed to prohibit Employee from acquiring as an investment not more

than three percent (3%) of the capital stock of a competing business, whose

stock is traded on a national securities exchange or over-the-counter.

 

(b)           Because of the difficulty of

measuring economic losses to the Company as a result of a breach of the

foregoing covenant, and because of the immediate and irreparable damage that

could be caused to the Company for which it would have no other adequate

remedy, Employee agrees that the foregoing covenant may be enforced by the

Company in the event of breach by him by injunctions and restraining orders

without the necessity of posting any bond therefor.

 

(c)           In the course of Employee’s

employment with the Company, Employee will become exposed to certain of the

Company’s confidential information and business relationships, which the above

covenants are designed to protect.  It

is agreed by the parties that the foregoing covenants in this Section 3 impose

a reasonable restraint on Employee in light of the activities and business of

the Company (including the Company’s subsidiaries) on the date of the execution

of this Agreement and the current plans of the Company (including the Company’s

subsidiaries); but it is also the intent of the Company and Employee that such

covenants be construed and enforced in accordance with the changing activities,

business and locations of the Company (including the Company’s subsidiaries)

throughout the term of this covenant, whether before or after the date of

termination of the employment of Employee, subject to the following

paragraph.  For example, if, during the

Term of this Agreement, the Company (including the Company’s subsidiaries)

engages in new and different activities, enters a new business or established

new locations for its current activities or business in addition to or other

than the activities or business enumerated under the Recitals above or the

locations currently established therefor, then Employee will be precluded from

soliciting the customers or employees of such new activities or business or

from such new location and from directly competing with such new business

within 100 miles of its then-established operating location(s) through the term

of this covenant.

 

It is further

agreed by the parties hereto that, in the event that Employee shall cease to be

employed hereunder, and shall enter into a business or pursue other activities

not in competition with the Company (including the Company’s subsidiaries), or

similar activities or business in locations the operation of which, under such

circumstances, does not violate clause (i) of this Section 3, and in any event

such new business, activities or location are not in violation of this Section

3 or of Employee’s obligations under this Section 3, if any, Employee shall not

be chargeable with a violation of this Section 3 if the Company (including the

Company’s subsidiaries) shall thereafter enter the same, similar or a

competitive (i) business, (ii) course of activities or (iii) location, as

applicable.

 

(d)           The covenants in this Section 3 are

severable and separate, and the unenforceability of any specific covenant shall

not affect the provisions of any other covenant.  Moreover, in the event any court of competent jurisdiction shall

determine that the scope, time or territorial restrictions set forth are

unreasonable, then it is the intention of the parties that such restrictions be

enforced to the fullest extent which the court deems reasonable, and the

Agreement shall thereby be reformed to such extent.

 

(e)           All of the covenants in this Section

3 shall be construed as an agreement independent of any other provision in this

Agreement, and the existence of any claim or cause of

 

4

 

action of Employee

against the Company, whether predicated on this Agreement or otherwise, shall

not constitute a defense to the enforcement by the Company of such

covenants.  It is specifically agreed

that the period of two (2) years following Employee’s employment set forth at

the beginning of this Section 3, during which the agreements and covenants of

Employee made in this Section 3 shall be effective, shall be computed by

excluding from such computation any time during which Employee is in violation

of any provision of this Section 3.

 

4.             Place of Performance.

 

(a)           Employee’s place of employment is the

Company’s headquarters in Dallas, Texas. 

Employee understands that he may be requested by the Board to relocate

from his present residence to another geographic location in order to more

efficiently carry out his duties and responsibilities under this Agreement or

as part of a promotion or other increase in duties and responsibilities.  In the event that Employee is requested to

relocate and agrees to do so, the Company will pay all relocation costs to move

Employee, his immediate family and their personal property and effects.  Such costs may include, by way of example,

but are not limited to, pre-move visits to search for a new residence,

investigate schools or for other purposes; temporary lodging and living costs

prior to moving into a new permanent residence; duplicate home carrying costs;

all closing costs on the sale of Employee’s present residence and on the

purchase of a comparable residence in the new location; and added income taxes

that Employee may incur, as a result of any payment hereunder, to the extent

any relocation costs are not deductible for tax purposes.  The general intent of the foregoing is that

Employee shall not personally bear any out-of-pocket cost as a result of the

relocation, with an understanding that Employee will use his best efforts to

incur only those costs which are reasonable and necessary to effect a smooth,

efficient and orderly relocation with minimal disruption to the business

affairs of the Company and the personal life of Employee and his family.

 

(b)           Notwithstanding the above, if

Employee is requested by the Board to relocate and Employee refuses, such

refusal shall not constitute “good cause” for termination of this Agreement

under the terms of Section 5(c).

 

5.             Term; Termination; Rights on

Termination.  The term of this

Agreement shall begin on the date hereof and continue through December 31,

2004, and, unless terminated sooner as herein provided, shall continue

thereafter on a three-year rolling basis on the same terms and conditions

contained herein until written notice is given by the Company or Employee, not

less than sixty (60) days prior to the December 31st of any

anniversary date of this Agreement during the Initial Term or thereafter, that

the balance of the term of the Agreement shall be three (3) years from the

January 1st following such notice (the “Term”).  This Agreement and Employee’s employment may

be terminated in any one of the following ways:

 

(a)           Death. 

The death of Employee shall immediately terminate the Agreement with no

severance compensation due to Employee’s estate.

 

(b)           Disability.  If, as a result of incapacity due to physical or mental illness

or injury, Employee shall have been absent from his full-time duties hereunder

for four (4) consecutive months, then thirty (30) days after receiving written

notice (which notice may occur before or after the end of such four (4) month

period, but which shall not be effective earlier than the last day of such four

(4) month period), the Company may

 

5

 

terminate

Employee’s employment hereunder provided Employee is unable to resume his full-time

duties at the conclusion of such notice period.  Also, Employee may terminate his employment hereunder if his

health should become impaired to an extent that makes the continued performance

of his duties hereunder hazardous to his physical or mental health or his life,

provided that Employee shall have furnished the Company with a written

statement from a qualified doctor to such effect and provided, further, that,

at the Company’s request made within thirty (30) days of the date of such

written statement, Employee shall submit to an examination by a doctor selected

by the Company who is reasonably acceptable to Employee or Employee’s doctor

and such doctor shall have concurred in the conclusion of Employee’s doctor.  In the event this Agreement is terminated as

a result of Employee’s disability, Employee shall receive from the Company, in

a lump-sum payment due within ten (10) days of the effective date of

termination, the base salary at the rate then in effect for whatever time

period is remaining under the Term of this Agreement.

 

(c)           Good Cause.  The Company may terminate the Agreement ten (10) days after

written notice to Employee for good cause, which shall be: (1) Employee’s

material and irreparable breach of this Agreement; (2) Employee’s gross

negligence in the performance or intentional nonperformance (continuing for ten

(10) days after receipt of the written notice of same) of any of Employee’s

material duties and responsibilities hereunder; (3) Employee’s dishonesty,

fraud or misconduct with respect to the business or affairs of the Company

which materially and adversely affects the operations or reputation of the

Company; (4) Employee’s conviction of a felony crime; or (5) chronic alcohol

abuse or illegal drug abuse by Employee. 

In the event of a termination for good cause, as enumerated above,

Employee shall have no right to any severance compensation.

 

(d)           Without Cause.  At any time after the commencement of employment, the Company

may, without cause, terminate this Agreement and Employee’s employment,

effective thirty (30) days after written notice is provided to the

Employee.  Should Employee be terminated

by the Company without cause, Employee shall receive from the Company, in a

lump-sum payment (“Severance Pay”) due on the effective date of termination,

the base salary at the rate then in effect for whatever time period is

remaining under the Term of this Agreement or for two (2) years, whichever

amount is greater.  Further, any

termination without cause by the Company shall operate to shorten the period

set forth in Section 3(a) and during which the terms of Section 3 apply to

one (1) year from the date of termination of employment.

 

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

 

(f)            Termination by Employee for Good Reason.  Employee may terminate his employment

hereunder for “Good Reason.”  As used

herein, “Good Reason” shall mean the continuance of any of the following after

ten (10) days’ prior written notice by Employee to the Company, specifying the

basis for such Employee’s having Good Reason to terminate this Agreement:

 

(i)            the assignment to Employee of any

duties materially and adversely inconsistent with Employee’s position as

specified in Section 1 hereof (or such other

 

6

 

position to which

he may be promoted), including status, offices, responsibilities or persons to

whom Employee reports as contemplated under Section 1 of this Agreement, or any

other action by the Company which results in a material and adverse change in

such position, status, offices, titles or responsibilities;

 

(ii)           Employee’s removal from, or failure

to be reappointed or reelected to, Employee’s position under this Agreement,

except as contemplated by Sections 5(a), (b), (c) and (e); or

 

(iii)          any other material breach of this

Agreement by the Company that is not cured within the ten (10) day time period

set forth in Section 5(f) above, including the failure to pay Employee on a

timely basis the amounts to which he is entitled under this Agreement.

 

In the event of any

termination by the Employee for Good Reason, as determined by a court of

competent jurisdiction or pursuant to the provisions of Section 16 below, the

Company shall pay all amounts and damages to which Employee may be entitled as

a result of such breach, including interest thereon and all reasonable legal

fees and expenses and other costs incurred by Employee to enforce his rights

hereunder.  In addition, Employee shall

be entitled to receive Severance Pay equivalent to the base salary at the rate

then in effect for whatever time period is remaining under the Term of this

Agreement or for two (2) years, whichever amount is greater.  Further, none of the provisions of Section 3

shall apply in the event this Agreement is terminated by Employee for Good

Reason.

 

(g)           Termination by Employee Without Cause.  If Employee resigns or otherwise terminates

his employment without Good Reason pursuant to Section 5(f), Employee shall

receive no severance compensation.

 

Upon termination of this Agreement for any reason provided in clauses

(a) through (g) above, Employee shall be entitled to receive all compensation

earned and all benefits vested and reimbursements due through the effective

date of termination.  Additional

compensation subsequent to such a termination of this Agreement, if any, will

be due and payable to Employee only to the extent and in the manner expressly

provided above or in Section 16.  Except

as otherwise provided in this Section 5, all other rights and obligations of

the Company and Employee under this Agreement shall cease as of the effective

date of termination of this Agreement; however, the Company’s obligations under

Section 9 herein and Employee’s obligations under Sections 3, 6, 7, 8 and 10

herein shall survive such termination in accordance with their terms.

 

6.             Return of Company Property.  All records, designs, patents, business

plans, financial statements, manuals, memoranda, lists and other property

delivered to or compiled by Employee by or on behalf of the Company (including

the Company’s subsidiaries) or its representatives, vendors or customers which

pertain to the business of the Company (including the Company’s subsidiaries)

shall be and remain the property of the Company and be subject at all times to

its discretion and control.  Likewise,

all correspondence, reports, records, charts, advertising materials and other

similar data pertaining to the business, activities or future plans of the

Company (including the Company’s subsidiaries) which is collected by Employee

shall be

 

7

 

delivered promptly to the

Company without request by it upon termination of Employee’s employment.

 

7.             Inventions.  Employee shall disclose promptly to the

Company any and all significant conceptions and ideas for inventions,

improvements and valuable discoveries, whether patentable or not, which are

conceived or made by Employee, solely or jointly with another, during the

period of employment or within one (1) year thereafter, and which are directly

related to the business or activities of the Company (including the Company’s

subsidiaries) and which Employee conceives as a result of his employment by the

Company.  Employee hereby assigns and

agrees to assign all his interests therein to the Company or its nominee.  Whenever requested to do so by the Company,

Employee shall execute any and all applications, assignments or other

instruments that the Company shall deem necessary to apply for and obtain

letters patent of the United States or any foreign country or to otherwise

protect the Company’s interest therein.

 

8.             Trade Secrets.  Employee agrees that he will not, during or

after the term of this Agreement with the Company, disclose the specific terms

of the Company’s (including the Company’s subsidiaries) relationships or

agreements with its significant vendors or customers or any other significant

and material trade secret of the Company (including the Company’s

subsidiaries), whether in existence or proposed, to any person, firm,

partnership, corporation or business for any reason or purpose whatsoever,

except as is disclosed in the ordinary course of business.

 

9.             Indemnification.  In the event Employee is made a party to any

threatened, pending or completed action, suit or proceeding, whether civil,

criminal, administrative or investigative (other than an action by the Company

against Employee), by reason of the fact that he is or was performing services

under this Agreement, then the Company shall indemnify Employee against all

expenses (including attorneys’ fees), judgments, fines and amounts paid in

settlement, as actually and reasonably incurred by Employee in connection

therewith.  In the event that both

Employee and the Company are made a party to the same third-party action,

complaint, suit or proceeding, the Company agrees to engage competent legal

representation, and Employee agrees to use the same representation, provided

that if counsel selected by the Company shall have a conflict of interest that

prevents such counsel from representing Employee, Employee may engage separate

counsel and the Company shall pay all attorneys’ fees of such separate

counsel.  Further, while Employee is

expected at all times to use his best efforts to faithfully discharge his

duties under this Agreement, Employee cannot be held liable to the Company for

errors or omissions made in good faith where Employee has not exhibited gross,

willful and wanton negligence and misconduct or performed criminal and

fraudulent acts which materially damage the business of the Company.

 

10.           No Prior Agreements.  Employee hereby represents and warrants to

the Company that the execution of this Agreement by Employee and his employment

by the Company and the performance of his duties hereunder will not violate or

be a breach of any agreement with a former employer, client or any other person

or entity.  Further, Employee agrees to

indemnify the Company for any claim, including, but not limited to, attorneys’

fees and expenses of investigation, by any such third party that such third party

may now have or may hereafter come to have against the Company based upon or

arising out of any non-competition agreement,

 

8

 

invention or secrecy

agreement between Employee and such third party which was in existence as of

the date of this Agreement.

 

11.           Assignment; Binding Effect.  Employee understands that he has been

selected for employment by the Company on the basis of his personal

qualifications, experience and skills. 

Employee agrees, therefore, he cannot assign all or any portion of his

performance under this Agreement and the Company agrees not to assign all or

any portion of its obligations under this Agreement (other than to a successor

as a result of a Change in Control). 

Subject to the preceding two (2) sentences and the express provisions of

Section 12 below, this Agreement shall be binding upon, inure to the benefit of

and be enforceable by the parties hereto and their respective heirs, legal

representatives, successors and assigns.

 

12.           Change in Control.

 

(a)           Unless he elects to terminate this

Agreement pursuant to (c) below, Employee understands and acknowledges that the

Company may be merged or consolidated with or into another entity and that such

entity shall automatically succeed to the rights and obligations of the Company

hereunder.

 

(b)           In the event of a pending Change in

Control wherein the Employee has not received written notice at least fifteen

(15) business days prior to the anticipated closing date of the transaction

giving rise to the Change in Control from the successor to all or a substantial

portion of the Company’s business and/or assets that such successor is willing

as of the closing to assume and agree to perform the Company’s obligations

under this Agreement in the same manner and to the same extent that the Company

is hereby required to perform, such Change in Control shall be deemed to be a

termination of this Agreement by the Company and the amount of the lump-sum

severance payment due to Employee shall be 2.78 times the sum of Employee’s

annual salary plus maximum annual bonus opportunity in effect immediately prior

to the Change in Control and the non-competition provisions of Section 3 shall

not apply whatsoever.  Payment shall be

made either at closing of the transaction if notice is served at least five (5)

days before closing or within ten (10) days of Employee’s written notice.

 

(c)           In any Change in Control situation in

which Employee has received written notice from the successor to the Company

that such pending successor is willing to assume the Company’s obligations

hereunder or Employee receives notice after (or within 15 business days prior

to) the Change in Control that Employee is being terminated, Employee may

nonetheless, at his sole discretion, elect to terminate this Agreement by

providing written notice to the Company at any time prior to closing of the

transaction and up to two (2) years after the closing of the transaction giving

rise to the Change in Control.  In such

case, the amount of the lump-sum severance payment due to Employee shall be

2.78 times the sum of Employee’s annual salary plus maximum annual bonus

opportunity in effect immediately prior to the Change in Control and the

non-competition provisions of Section 3 shall all apply.  Payment shall be made either at closing if

notice is served at least five (5) days before closing or within ten (10) days

of written notice by Employee.

 

(d)           For purposes of applying Section 5

under the circumstances described in (b) and (c) above, the effective date of

termination will be the later of the closing date of the transaction giving

rise to the Change in Control or Employee’s notice as described above, and all

 

9

 

compensation,

reimbursements and lump-sum payments due Employee must be paid in full by the

Company at such time.  Further, Employee

will be given sufficient time in order to comply with the Securities and

Exchange Commission’s regulations to elect whether to exercise and sell all or

any of his vested options to purchase Common Stock of the Company, including

any options with accelerated vesting under the provisions of the Company’s

stock option or similar plan, as amended or any warrants, such that he may

convert the options or warrants to shares of Common Stock of the Company at or

prior to the closing of the transaction giving rise to the Change in Control,

if he so desires.

 

(e)           A

“Change in Control” shall be deemed to have occurred if:

 

(i)            any person, other than the Company

or an employee benefit plan of the Company, acquires directly or indirectly the

Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange

Act of 1934, as amended) of any voting security of the Company and immediately

after such acquisition such person is, directly or indirectly, the Beneficial

Owner of voting securities representing 30% or more of the total voting power

of all of the then-outstanding voting securities of the Company;

 

(ii)           the individuals (A) who, as of the

closing date of the Company’s initial public offering, constitute the Board of

Directors of the Company (the “Original Directors”) or (B) who thereafter are

elected to the Board of Directors of the Company and whose election, or

nomination for election, to the Board of Directors of the Company was approved

by a vote of at least two-thirds (2/3) of the Original Directors then still in

office (such directors becoming “Additional Original Directors” immediately

following their election) or (C) who are elected to the Board of Directors of

the Company and whose election, or nomination for election, to the Board of

Directors of the Company was approved by a vote of at least two-thirds (2/3) of

the Original Directors and Additional Original Directors then still in office

(such directors also becoming “Additional Original Directors” immediately

following their election), cease for any reason to constitute a majority of the

members of the Board of Directors of the Company;

 

(iii)          the consummation of a merger,

consolidation, recapitalization or reorganization of the Company, a reverse

stock split of outstanding voting securities of the Company, or consummation of

any such transaction if stockholder approval is not sought or obtained, other

than any such transaction which would result in at least 75% of the total

voting power represented by the voting securities of the surviving entity

outstanding immediately after such transaction being Beneficially Owned by

holders of at least 75% of the outstanding voting securities of the Company

immediately prior to the transaction, with the voting power of each such

continuing holder relative to other such continuing holders not substantially

altered in the transaction; or

 

(iv)          the consummation of a complete

liquidation of the Company or an agreement for the sale or disposition by the

Company of all or a substantial portion of the Company’s assets (i.e., 50% or

more of the total assets of the Company (including the Company’s

subsidiaries)).

 

(f)            Continuation of Benefits.  (i) Following the termination of the Executive’s

employment in connection with a Change in Control (as contemplated by

Section 12(b)

 

10

 

or 12(c) of this

Agreement) (a “Change in Control Termination”) and until the earlier of

(A) three (3) years following such Change in Control Termination or (B)

the date on which the Executive becomes employed by a new employer (other than

to the successor to the Company following such Change in Control), the Company

shall, at its expense, provide the Executive with medical, dental, life

insurance, disability and accidental death and dismemberment benefits

(“Insurance Benefits”) at the highest level provided to the Executive

immediately prior to the Change in Control; provided, however, if the Executive

becomes employed by a new employer that maintains Insurance Benefits that

either (x) do not cover the Executive with respect to a pre-existing condition

that was covered under the Company’s Insurance Benefits, or (y) do not cover

the Executive for a designated waiting period, or (z) do not provide for a

certain benefit, the Executive’s coverage under the Company’s Insurance

Benefits shall continue (with respect to such area of non-coverage described in

(x), (y) or (z), as applicable), without limitation, until the earlier of the

end of the applicable period of non-coverage under the new employer’s Insurance

Benefits or the third anniversary of the Change in Control.

 

(ii)

Following a Change in Control Termination the special benefit allowance of

$8,000 contemplated by Section 2(c)(vii) of this Agreement will continue

for 3 years thereafter.

 

(iii)

The Company shall reimburse all reasonable expenses incurred by the Executive

for reasonable office and secretarial expenses and for reasonable professional

outplacement services by qualified consultants selected by the Executive for up

to 3 years after a Change in Control Termination.

 

(iv)

The Executive shall not be required to seek other employment following a Change

in Control Termination and any compensation earned from other employment shall

not reduce the amounts otherwise payable under this Agreement.

 

 (g)          If any portion of the severance

benefits, Change in Control benefits or any other payment under this Agreement,

or under any other agreement with, or plan of the Company, including but not

limited to stock options, warrants and other long-term incentives (in the

aggregate “Total Payments”) would be subject to the excise tax imposed by

Section 4999 of the Code, as amended (or any similar tax that may

hereafter be imposed) or any interest or penalties with respect to such excise

tax (such excise tax, together with any such interest and penalties, are

hereinafter collectively referred to as the “Excise Tax”), then Employee shall

be entitled to receive from the Company an additional payment (the “Gross-up

Payment”) (i.e., in addition to such other severance benefits, Change in

Control benefits or any other payments under this Agreement) in an amount such

that the net amount of Total Payments and Gross-up Payment retained by the

Employee, after the calculation and deduction of all Excise Tax on the Total

Payments and all federal, state and local income tax, employment tax and Excise

Tax on the Gross-up Payment, shall be equal to the Total Payments.

 

For purposes of this Section Employee’s applicable

Federal, state and local taxes shall be computed at the maximum marginal rates,

taking into account the effect of any loss of personal exemptions resulting

from receipt of the Gross-Up Payment.

 

11

 

All determinations required to be made under this

Section 12, including whether a Gross-Up Payment is required under this

Section, and the assumptions to be used in determining the Gross-Up Payment,

shall be made by the Company’s current independent accounting firm, or such

other firm as the Company may designate in writing prior to a Change in Control

(the “Accounting Firm”), which shall provide detailed supporting calculations

both to the Company and Employee within twenty business days of the receipt of

notice from Employee that there will likely be a Change in Control, or such

earlier time as is requested by the Company. 

In the event that the Accounting Firm is serving as accountant or

auditor for the party effecting the Change in Control or is otherwise

unavailable, Employee (together with all other employees with comparable

appointment rights in their respective employment agreements such that all such

employees may collectively select a single accounting firm) may appoint another

nationally recognized accounting firm to make the determinations required

hereunder (which accounting firm shall then be referred to as the Accounting

Firm hereunder).  All fees and expenses

of the Accounting Firm with respect to such determinations described above

shall be borne solely by the Company.

 

Employee agrees (unless requested otherwise by the

Company) to use reasonable efforts to contest in good faith any subsequent

determination by the Internal Revenue Service that Employee owes an amount of

Excise Tax greater than the amount determined pursuant to this Section; provided,

that Employee shall be entitled to reimbursement by the Company (on an after

tax basis) of all fees and expenses reasonably incurred by Employee in

contesting such determination.  In the

event the Internal Revenue Service or any court of competent jurisdiction

determines that Employee owes an amount of Excise Tax that is greater than the

amount previously taken into account and paid under this Agreement (such

additional Excise Tax being the “Additional Excise Tax”), the Company shall

promptly pay to Employee the amount of such shortfall.  In the case of any payment that the Company

is required to make to Employee pursuant to the preceding sentence (a “Later

Payment”), the Company shall also pay to Employee an additional amount such

that after payment by Employee of all of Employee’s applicable Federal, state

and local taxes, including any interest and penalties assessed by any taxing

authority, on the Later Payment, Employee will retain from the Later Payment an

amount equal to the Additional Excise Tax, which Employee shall use to pay the

Additional Excise Tax.

 

(h)           In

the event of a Change in Control, the Company shall require that the ultimate

parent entity (or if no parent entity, the acquiring entity itself) of any

entity that acquires control (through ownership of securities or assets,

consistent with the definitional triggers of a Change in Control set forth

above) of the Company in connection with such Change in Control assume or

guaranty the Company’s obligations under Sections 12(f) and 12(g) of this

Agreement.

 

13.           Complete

Agreement.  This Agreement is not a

promise of future employment.  Employee

has no oral representations, understandings or agreements with the Company or any

of its officers, directors or representatives covering the same subject matter

as this Agreement.  This written

Agreement is the final, complete and exclusive statement and expression of the

agreement between the Company and Employee and of all the terms of this

Agreement, and it cannot be varied, contradicted or supplemented by evidence of

any prior or contemporaneous oral or written agreements, including without

limitation Employee’s Amended and Restated Employment Agreement dated May 18,

2001, which is superseded and replaced in its entirety by this Agreement.  This written Agreement may not be later

modified except by a further writing signed by a duly authorized officer of the

Company and Employee, and no term of this

 

12

 

Agreement may be waived

except by writing signed by the party waiving the benefit of such term.

 

14.           Notice.  Whenever any notice is required hereunder,

it shall be given in writing addressed as follows:

 

	

  To the Company:

  	

  SOURCECORP, Incorporated

  
	

   

  	

  3232 McKinney Avenue

  
	

   

  	

  Suite 1000

  
	

   

  	

  Dallas, Texas 75204

  
	

   

  	

  Attn: 

  President

  
	

   

  	

   

  
	

  with a copy to:

  	

  SOURCECORP,

  Incorporated

  
	

   

  	

  3232 McKinney Avenue

  
	

   

  	

  Suite 1000

  
	

   

  	

  Dallas, Texas 75204

  
	

   

  	

  Attn: 

  General Counsel

  
	

   

  	

   

  
	

  with a copy to:

  	

  Charles C. Reeder, Esq.

  
	

   

  	

  Locke Liddell & Sapp LLP

  
	

   

  	

  2200 Ross Avenue

  
	

   

  	

  Suite 2200

  
	

   

  	

  Dallas, Texas 75201

  
	

   

  	

   

  
	

  To Employee:

  	

  Joe A. Rose

  
	

   

  	

  3924 Southwestern Boulevard

  
	

   

  	

  Dallas, Texas 75225

  

 

Notice shall be deemed

given and effective three (3) days after the deposit in the U.S. mail of a

writing addressed as above and sent first class mail, certified, return receipt

requested, or when actually received. 

Either party may change the address for notice by notifying the other

party of such change in accordance with this Section 14.

 

15.           Severability;

Headings.  If any portion of this

Agreement is held invalid or inoperative, the other portions of this Agreement

shall be deemed valid and operative and, so far as is reasonable and possible,

effect shall be given to the intent manifested by the portion held invalid or

inoperative.  The Section headings

herein are for reference purposes only and are not intended in any way to

describe, interpret, define or limit the extent or intent of the Agreement or

of any part hereof.

 

16.           Arbitration.  Any unresolved dispute or controversy

arising under or in connection with this Agreement or Employee’s employment

shall be settled exclusively by arbitration, conducted before a panel of three

(3) arbitrators in Dallas, Texas, in accordance with the rules of the American

Arbitration Association then in effect. 

The arbitrators shall not have the authority to add to, detract from, or

modify any provision hereof nor to award punitive damages to any injured party.  The arbitrators shall have the authority to

order back-pay, severance compensation, vesting of options (or cash

compensation in lieu of vesting of options), reimbursement of costs, including

those incurred to enforce this Agreement, and interest thereon

 

13

 

in the event the

arbitrators determine that Employee was terminated without disability or good

cause, as defined in Sections 5(b) and 5(c), respectively, or that the Company

has otherwise materially breached this Agreement.  A decision by a majority of the arbitration panel shall be final

and binding.  Judgment may be entered on

the arbitrators’ award in any court having jurisdiction.  The costs of any arbitration proceeding

shall be borne by the party or parties not prevailing in such proceeding as

determined by the arbitrators.  This

Section shall survive any termination of this Agreement.

 

[Balance of page intentionally left blank]

 

14

 

17.           Governing Law.  This Agreement shall in all respects be construed

according to the laws of the State of Delaware.

 

	

   

  	

  EMPLOYEE:

  
	

   

  	

   

  
	

   

  	

  /s/ Joe A. Rose

  
	

   

  	

  Joe A. Rose

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SOURCECORP,  INCORPORATED

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Ed H. Bowman, Jr.

  
	

   

  	

  Title:

  	

  President and Chief Executive Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SOURCECORP Management,

  L.P.

  
	

   

  	

   

  
	

   

  	

  By: SRCP  Management,

  Inc.,

  
	

   

  	

   

  	

  General Partner

  
	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ Ed H. Bowman, Jr.

  
	

   

  	

   

  	

  Title:

  	

  President

  
					

 

15EMPLOYMENT AGREEMENT

EXHIBIT 10.5

 

FIRST AMENDMENT TO

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

(Michael S. Rupe)

 

THIS FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the

“Amendment”) by and between SOURCECORP,

Incorporated, a Delaware corporation and SOURCECORP Management, L.P., a Texas limited partnership and

indirect wholly owned subsidiary of SOURCECORP,

Incorporated (collectively, the “Company”), and Michael S. Rupe

(“Employee”) is made and entered into

effective as of April 24, 2002.

 

R E C I T A L S

 

The following statements are true and correct:

 

This Amendment amends that certain Amended and Restated Employment

Agreement by and between Employee and F.Y.I. Incorporated (n/k/a SOURCECORP, Incorporated), dated May 18,

2001 (the “Agreement”).

 

The parties desire to amend the Agreement to amend the Change in Control

provisions contained therein.

 

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.     Amendment

to Agreement.  The

parties agree to amend Section 12 of the Agreement to read in its entirety as

follows:

12.             Change in Control.

 

(a)           Unless he elects to terminate this

Agreement pursuant to (c) below, Employee understands and acknowledges that the

Company may be merged or consolidated with or into another entity and that such

entity shall automatically succeed to the rights and obligations of the Company

hereunder.

 

(b)           In the event of a

pending Change in Control wherein the Employee has not received written notice

at least fifteen (15) business days prior to the anticipated closing date of

the transaction giving rise to the Change in Control from the successor to all

or a substantial portion of the Company’s business and/or assets that such

successor is willing as of the closing to assume and agree to perform the

Company’s obligations under this Agreement in the same manner and to the same

extent that the Company is hereby required to perform, such Change in Control

shall be deemed to be a termination of this Agreement by the Company and the

amount of the lump-sum severance payment due to Employee shall be 1.15 times

the sum of Employee’s annual salary plus maximum annual bonus opportunity in

effect immediately prior to the Change in Control and the non-competition

provisions of paragraph 3 shall not apply whatsoever.

 

 

Payment shall be

made either at closing of the transaction if notice is served at least five (5)

days before closing or within ten (10) days of Employee’s written notice.

 

(c)           In any Change in

Control situation in which Employee has received written notice from the

successor to the Company that such pending successor is willing to assume the

Company’s obligations hereunder or Employee receives notice after (or within

fifteen (15) business days prior to) the Change in Control that Employee is

being terminated, Employee may nonetheless, at his sole discretion, elect to

terminate this Agreement by providing written notice to the Company at any time

prior to closing of the transaction and up to two (2) years after the closing

of the transaction giving rise to the Change in Control.  In such case, the amount of the lump-sum

severance payment due to Employee shall be 1.15 times the sum of Employee’s

annual salary plus maximum annual bonus opportunity in effect immediately prior

to the Change in Control and the non-competition provisions of paragraph 3

shall all apply.  Payment shall be made

either at closing if notice is served at least five (5) days before closing or

within ten (10) days of written notice by Employee.

 

(d)           For purposes of

applying paragraph 5 under the circumstances described in (b) and (c) above,

the effective date of termination will be the later of the closing date of the

transaction giving rise to the Change in Control or Employee’s notice as

described above, and all compensation, reimbursements and lump-sum payments due

Employee must be paid in full by the Company at such time.  Further, Employee will be given sufficient

time in order to comply with then Securities and Exchange Commission’s

regulations to elect whether to exercise and sell all or any of his vested

options to purchase Common Stock of the Company, including any options with

accelerated vesting under the provisions of the Company’s stock option or

similar plan, as amended (and as modified by the related option

agreement/certificate in accordance with such Plan) or any warrants, such that

he may convert such options or warrants to shares of Common Stock of the

Company at or prior to the closing of the transaction giving rise to the Change

in Control, if he so desires.

 

(e)           A “Change in

Control” shall be deemed to have occurred if:

 

(i)            any person, other than the Company

or an employee benefit plan of the Company, acquires directly or indirectly the

Beneficial Ownership (as defined in Section 13(d) of the Securities

Exchange Act of 1934, as amended) of any voting security of the Company and

immediately after such acquisition such Person is, directly or indirectly, the

Beneficial Owner of voting securities representing 30% or more of the total

voting power of all of the then-outstanding voting securities of the Company;

 

(ii)           the individuals (A) who, as of the

closing date of the Company’s initial public offering, constitute the Board of

Directors of the Company (the “Original Directors”) or (B) who thereafter are

elected to the Board of Directors of the Company and whose election, or

nomination for election, to the Board of Directors of the Company was approved

by a vote of at least two-thirds (2/3) of the Original Directors then still in

office (such directors becoming “Additional Original Directors” immediately

following their election) or (C) who are elected to the Board of Directors of

the Company and whose election, or nomination for election, to the Board of

Directors of the Company was

 

2

 

approved by a vote

of at least two-thirds (2/3) of the Original Directors and Additional Original

Directors then still in office (such directors also becoming “Additional

Original Directors” immediately following their election), cease for any reason

to constitute a majority of the members of the Board of Directors of the

Company;

 

(iii)

the consummation of a merger, consolidation, recapitalization, or reorganization

of the Company, a reverse stock split of outstanding voting securities of the

Company, or consummation of any such transaction if stockholder approval is not

sought or obtained, other than any such transaction which would result in at

least 75% of the total voting power represented by the voting securities of the

surviving entity outstanding immediately after such transaction being

Beneficially Owned by holders of at least 75% of the outstanding voting

securities of the Company immediately prior to the transaction, with the voting

power of each such continuing holder relative to other such continuing holders

not substantially altered in the transaction; or

 

(iv)

the consummation of a plan of complete liquidation of the Company or an

agreement for the sale or disposition by the Company of all or a substantial

portion of the Company’s assets (i.e., 50% or more of the total assets of the

Company).

 

 (f)           If

any portion of the severance benefits, Change in Control benefits or any other

payment under this Agreement, or under any other agreement with, or plan of the

Company, including but not limited to stock options, warrants and other

long-term incentives (in the aggregate “Total Payments”) would be subject to

the excise tax imposed by Section 4999 of the Code, as amended (or any

similar tax that may hereafter be imposed) or any interest or penalties with

respect to such excise tax (such excise tax, together with any such interest

and penalties, are hereinafter collectively referred to as the “Excise Tax”),

then Employee shall be entitled to receive from the Company an additional

payment (the “Gross-up Payment”) in an amount such that the net amount of Total

Payments and Gross-up Payment retained by the Employee, after the calculation

and deduction of all Excise Tax on the Total Payments and all federal, state

and local income tax, employment tax and Excise Tax on the Gross-up Payment,

shall be equal to the Total Payments.

 

For purposes of this paragraph Employee’s

applicable Federal, state and local taxes shall be computed at the maximum

marginal rates, taking into account the effect of any loss of personal

exemptions resulting from receipt of the Gross-Up Payment.

 

All determinations

required to be made under this paragraph 12, including whether a Gross-Up

Payment is required under this paragraph, and the assumptions to be used in

determining the Gross-Up Payment, shall be made by the Company’s current

independent accounting firm, or such other firm as the Company may designate in

writing prior to a Change in Control (the “Accounting Firm”), which shall

provide detailed supporting calculations both to the Company and Employee

within twenty business days of the receipt of notice from Employee that there

will likely be a Change in Control, or such earlier time as is requested by the

Company.  In the event that the

Accounting Firm is serving as accountant or auditor for the party effecting the

Change in Control or is otherwise unavailable, Employee (together with all other

employees with comparable appointment rights in their respective employment

agreements such

 

3

 

that all such

employees may collectively select a single accounting firm) may appoint another

nationally recognized accounting firm to make the determinations required

hereunder (which accounting firm shall then be referred to as the Accounting

Firm hereunder).  All fees and expenses

of the Accounting Firm with respect to such determinations described above shall

be borne solely by the Company.

 

Employee agrees

(unless requested otherwise by the Company) to use reasonable efforts to

contest in good faith any subsequent determination by the Internal Revenue

Service that Employee owes an amount of Excise Tax greater than the amount

determined pursuant to this paragraph; provided, that Employee shall be

entitled to reimbursement by the Company (on an after tax basis) of all fees

and expenses reasonably incurred by Employee in contesting such

determination.  In the event the

Internal Revenue Service or any court of competent jurisdiction determines that

Employee owes an amount of Excise Tax that is greater than the amount

previously taken into account and paid under this Agreement (such additional

Excise Tax being the “Additional Excise Tax”), the Company shall promptly pay

to Employee the amount of such shortfall. 

In the case of any payment that the Company is required to make to

Employee pursuant to the preceding sentence (a “Later Payment”), the Company

shall also pay to Employee an additional amount such that after payment by

Employee of all of Employee’s applicable Federal, state and local taxes,

including any interest and penalties assessed by any taxing authority, on the

Later Payment, Employee will retain from the Later Payment an amount equal to the

Additional Excise Tax, which Employee shall use to pay the Additional Excise

Tax.

2.     Governing

Law.  This Amendment

shall in all respects be construed according to the laws of the State of Texas.

3.     Counterparts.  This Amendment may be executed simultaneously

in two (2) or more counterparts, each of which shall be deemed an original and

all of which together shall constitute but one and the same instrument.

4.     Effect of Amendment.  Except as specifically amended by this

Amendment, all provisions of the Agreement remain in full force and effect in

accordance with their express terms.

 

[Balance of

page intentionally left blank]

 

4

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as

of the day and year first above written.

 

	

   

  	

  SOURCECORP,  INCORPORATED

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Joe Rose

  
	

   

  	

  Title:

  	

  Chief Operating Officer and Executive Vice President

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SOURCECORP Management,

  L.P.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By: SRCP  Management,

  Inc.,

  
	

   

  	

  General Partner

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Joe Rose

  
	

   

  	

  Title:

  	

  Chief Operating Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  EMPLOYEE:

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  /s/ Michael S. Rupe

  
	

   

  	

  MICHAEL S. RUPE

  

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00039-of-00352.parquet"}]]