Document:

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EXHIBIT

10.2

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Charles S. Gilbert)

 

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 Charles S. Gilbert (“Employee”)

is hereby entered into and effective as of April 24, 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 Senior Vice President, General Counsel and Secretary.  As such, Employee shall have responsibilities,

duties and authority reasonably accorded to and expected of a Senior Vice

President, General Counsel and Secretary. 

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 $220,000 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 65% of his annual base salary in accordance with the

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

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

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

committee thereof.  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

 

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in all other

Company-wide employee benefits as available from time to time, which will

include participation in the Company’s Incentive Compensation Plan.

 

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

Plan and Non-Qualified Plan.

 

(vii)         The Company shall reimburse Employee up

to $5,000 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

 

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business, customers,

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

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

covenant shall not be deemed to prohibit Employee from acquiring as an

investment not more than three percent (3%) of the capital stock of a competing

business, whose stock is traded on a national securities exchange or

over-the-counter.

 

(b)           Because of the difficulty of

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

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

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

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

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

without the necessity of posting any bond therefor.

 

(c)           In the course of Employee’s

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

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

covenants are designed to protect.  It

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

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

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

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

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

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

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

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

termination of the employment of Employee, subject to the following

paragraph.  For example, if, during the

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

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

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

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

locations currently established therefor, then Employee will be precluded from

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

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

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

of this covenant.

 

It is further

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

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

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

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

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

such new business, activities or location are not in violation 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.

 

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(e)           All of the covenants in this Section

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

Agreement, and the existence of any claim or cause of action of Employee

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

not constitute a defense to the enforcement by the Company of such covenants.  It is specifically agreed that the period of

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

this Section 3, during which the agreements and covenants of Employee made in

this Section 3 shall be effective, shall be computed by excluding from such

computation any time during which Employee is in violation of any provision of

this Section 3.

 

4.             Place of Performance.

 

(a)           Employee’s place of employment is the

Company’s headquarters in Dallas, Texas. 

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

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

efficiently carry out his duties and responsibilities under this Agreement or

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

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

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

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

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

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

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

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

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

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

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

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

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

efficient and orderly relocation with minimal disruption to the business

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

 

(b)           Notwithstanding the above, if

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

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

under the terms of Section 5(c).

 

5.             Term; Termination; Rights on

Termination.  The term of this

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

2002 (the “Term”).  This Agreement and

Employee’s employment may be terminated in any one of the following ways:

 

(a)           Death. 

The death of Employee shall immediately terminate the Agreement with no

severance compensation due to Employee’s estate.

 

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

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

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

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

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

(4) month period), the Company may terminate Employee’s employment hereunder

provided Employee is unable to resume his full-time duties at the conclusion of

such notice period.  Also, Employee may

terminate his employment hereunder if his health should become impaired to an

extent that makes

 

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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 a period of

one (1) year.

 

(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 a period of one (1) year.  Further, any termination without cause by

the Company shall operate to shorten the period set forth in Section 3(a)

and during which the terms of Section 3 apply to one (1) year from the date of

termination of employment.

 

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

 

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

hereunder for “Good Reason.”  As used herein,

“Good Reason” shall mean the continuance of any of the following after ten (10)

days’ prior written notice by Employee to the Company, specifying the basis for

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

 

(i)            the assignment to Employee of any

duties materially and adversely inconsistent with Employee’s position as

specified in Section 1 hereof (or such other position to which he may be

promoted), including status, offices, responsibilities or persons to whom

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

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

such position, status, offices, titles or responsibilities;

 

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(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 a period of one (1) year. 

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 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

 

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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, 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

 

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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 1.22 times the sum of Employee’s

annual salary plus maximum bonus opportunity in effect immediately prior to the

Change in Control and the non-competition provisions of Section 3 shall not

apply whatsoever.  Payment shall be made

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

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

 

(c)           In any Change in Control situation in

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

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

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

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

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

provisions of Section 3 shall all apply. 

Payment shall be made either at closing if notice is served at least

five (5) days before closing or within ten (10) days of written notice by Employee.

 

(d)           For purposes of applying Section 5

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

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

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

compensation, reimbursements and lump-sum payments due Employee must be paid in

full by the Company at such time. 

Further, Employee will be given sufficient time in order to comply with

the Securities and Exchange Commission’s regulations to elect whether to

exercise and sell all or any of his vested options to purchase Common Stock of

the Company, including any options with accelerated vesting under the

provisions of the Company’s stock option or similar plan, as amended or any

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

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

to the Change in Control, if he so desires.

 

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(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)            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

 

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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.

 

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.

 

11

 

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

Section 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 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

  

 

12

 

	

  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:

  	

  Charles S. Gilbert

  
	

   

  	

  5520 Emerson

  
	

   

  	

  Dallas, TX 75209

  

 

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 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]

 

13

 

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

construed according to the laws of the State of Delaware.

 

	

   

  	

  EMPLOYEE:

  
	

   

  	

   

  
	

   

  	

  /s/ Charles S. Gilbert

  
	

   

  	

  Charles S. Gilbert

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  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

  
					

 

14AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EXHIBIT

10.3

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Ed H. Bowman, Jr.)

 

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 Ed H. Bowman, Jr. (“Employee”)

is hereby entered into and effective as of April 8, 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 President and Chief Executive Officer. 

As such, Employee shall have responsibilities, duties and authority

reasonably accorded to and expected of a President and Chief Executive Officer

and will report directly to the Board of Directors of the Company (the

“Board”).  Employee hereby accepts this

employment upon the terms and conditions herein contained and, subject to

Section 1(b), agrees to devote his working time, attention and efforts to

promote and further the business of the Company.

 

(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 $575,000 per year,

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

procedures but not less than bi-weekly. 

On at least an annual basis, the Board will review Employee’s

performance and may make increases to such base salary if, in its discretion,

any such increase is warranted. Such recommended increase would, in all

likelihood, require approval by the Board or a duly constituted committee

thereof.

 

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

opportunity of up to 100% 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 reimburse Employee

up to $300 per month for club dues actually incurred by Employee, provided

that such club is used at least 50% of the time for business purposes.

 

2

 

(vi)          The Company shall provide Employee

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

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

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

the Company’s Incentive Compensation Plan.

 

(vii)         The Company shall provide Employee with

reasonable assistance in personal tax planning from the Company’s auditors.

 

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

Plan and Non-Qualified Plan.

 

(ix)           The Company shall, under Employee’s

direction, establish a Supplemental Retirement Plan/Survivor Protection Plan to

be placed inside the Company’s Non-Qualified Plan and provide Employee with

such benefit.

 

(x)            The Company shall reimburse Employee

up to $15,000 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

 

3

 

behalf or on

behalf of any competitor, which candidate was either called upon by the Company

(including the subsidiaries thereof) or for which the Company made an

acquisition analysis, for the purpose of acquiring such entity; or

 

(v)           disclose customers, whether in

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

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

whatsoever.

 

As used in

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

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

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

to the Company resulting from a Change in Control).  Notwithstanding the above, the foregoing covenant shall not be

deemed to prohibit Employee from acquiring as an investment not more than three

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

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

 

(b)           Because of the difficulty of

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

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

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

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

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

without the necessity of posting any bond therefor.

 

(c)           In the course of Employee’s

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

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

covenants are designed to protect.  It

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

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

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

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

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

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

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

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

termination of the employment of Employee, subject to the following

paragraph.  For example, if, during the

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

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

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

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

locations currently established therefor, then Employee will be precluded from

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

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

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

of this covenant.

 

It is further

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

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

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

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

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

such new business, activities or location are not in violation 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

 

4

 

subsidiaries) shall

thereafter enter the same, similar or a competitive (i) business, (ii) course

of activities or (iii) location, as applicable.

 

(d)           The covenants in this Section 3 are

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

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

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

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

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

Agreement shall thereby be reformed to such extent.

 

(e)           All of the covenants in this Section

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

Agreement, and the existence of any claim or cause of action of Employee

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

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

covenants.  It is specifically agreed

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

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

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

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

of any provision of this Section 3.

 

4.             Place of Performance.

 

(a)           Employee’s

place of employment is the Company’s headquarters in Dallas, Texas.  Employee understands that he may be

requested by the Board to relocate from his present residence to another

geographic location in order to more efficiently carry out his duties and

responsibilities under this Agreement or as part of a promotion or other

increase in duties and responsibilities. 

In the event that Employee is requested to relocate and agrees to do so,

the Company will pay all relocation costs to move Employee, his immediate

family and their personal property and effects.  Such costs may include, by way of example, but are not limited

to, pre-move visits to search for a new residence, investigate schools or for

other purposes; temporary lodging and living costs prior to moving into a new

permanent residence; duplicate home carrying costs; all closing costs on the

sale of Employee’s present residence and on the purchase of a comparable

residence in the new location; and added income taxes that Employee may incur,

as a result of any payment hereunder, to the extent any relocation costs are

not deductible for tax purposes.  The

general intent of the foregoing is that Employee shall not personally bear any

out-of-pocket cost as a result of the relocation, with an understanding that

Employee will use his best efforts to incur only those costs which are reasonable

and necessary to effect a smooth, efficient and orderly relocation with minimal

disruption to the business affairs of the Company and the personal life of

Employee and his family.

 

(b)           Notwithstanding

the above, if Employee is requested by the Board to relocate and Employee

refuses, such refusal shall not constitute “good cause” for termination of this

Agreement under the terms of Section 5(c).

 

5.             Term;

Termination; Rights on Termination. 

The term of this Agreement shall begin on the date hereof and continue

through December 31, 2006, and, unless terminated sooner as herein

provided, shall continue thereafter on a five-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

 

5

 

the Initial Term or thereafter, that the balance of the term of the

Agreement shall be five (5) years from the January 1st following

such notice (the “Term”).  This

Agreement and Employee’s employment may be terminated in any one of the

following ways:

 

(a)           Death. 

The death of Employee shall immediately terminate the Agreement with no

severance compensation due to Employee’s estate.

 

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

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

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

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

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

(4) month period), the Company may terminate Employee’s employment hereunder

provided Employee is unable to resume his full-time duties at the conclusion of

such notice period.  Also, Employee may

terminate his employment hereunder if his health should become impaired to an

extent that makes the continued performance of his duties hereunder hazardous

to his physical or mental health or his life, provided that Employee shall have

furnished the Company with a written statement from a qualified doctor to such

effect and provided, further, that, at the Company’s request made within thirty

(30) days of the date of such written statement, Employee shall submit to an

examination by a doctor selected by the Company who is reasonably acceptable to

Employee or Employee’s doctor and such doctor shall have concurred in the

conclusion of Employee’s doctor.  In the

event this Agreement is terminated as a result of Employee’s disability,

Employee shall receive from the Company, in a lump-sum payment due within ten

(10) days of the effective date of termination, the base salary at the rate

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

Agreement or for one (1) year, whichever amount is greater.

 

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

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

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

negligence in the performance or intentional nonperformance (continuing for ten

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

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

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

which materially and adversely affects the operations or reputation of the

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

abuse or illegal drug abuse by Employee. 

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

Employee shall have no right to any severance compensation.

 

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

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

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

Employee.  Should Employee be terminated

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

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

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

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

 

6

 

the period set

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

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

 

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

 

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

hereunder for “Good Reason.”  As used

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

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

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

 

(i)            the assignment to Employee of any

duties materially and adversely inconsistent with Employee’s position as

specified in Section 1 hereof (or such other position to which he may be

promoted), including status, offices, responsibilities or persons to whom

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

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

such position, status, offices, titles or responsibilities;

 

(ii)           Employee’s removal from, or failure

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

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

 

(iii)          any other material breach of this

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

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

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

 

In the event of any

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

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

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

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

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

hereunder.  In addition, Employee shall

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

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

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

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

Reason.

 

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

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

receive no severance compensation.

 

Upon termination of this Agreement for any reason provided in clauses

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

earned and all benefits vested and reimbursements due through the effective

date of termination.  Additional

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

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

provided above or in Section 16.  Except

as 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

 

7

 

Agreement; however, the Company’s obligations under Section 9 herein

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

survive such termination in accordance with their terms.

 

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

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

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

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

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

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

its discretion and control.  Likewise,

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

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

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

shall be delivered promptly to the Company without request by it upon

termination of Employee’s employment.

 

7.             Inventions.  Employee shall disclose promptly to the

Company any and all significant conceptions and ideas for inventions,

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

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

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

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

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

Company.  Employee hereby assigns and

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

Employee shall execute any and all applications, assignments or other instruments

that the Company shall deem necessary to apply for and obtain letters patent of

the United States or any foreign country or to otherwise protect the Company’s

interest therein.

 

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

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

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

agreements with its significant vendors or customers or any other significant

and material trade secret of the Company (including the Company’s subsidiaries),

whether in existence or proposed, to any person, firm, partnership, corporation

or business for any reason or purpose whatsoever, except as is disclosed in the

ordinary course of business.

 

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

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

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

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

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

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

settlement, as actually and reasonably incurred by Employee in connection

therewith.  In the event that both

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

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

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

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

prevents such counsel from representing Employee, Employee may engage separate

counsel and the Company shall pay all attorneys’ fees 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

 

8

 

Company for errors or omissions made in good faith

where Employee has not exhibited gross, willful and wanton negligence and

misconduct or performed criminal and fraudulent acts which materially damage

the business of the Company.

 

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

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

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

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

or entity.  Further, Employee agrees to

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

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

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

or arising out of any non-competition agreement, invention or secrecy agreement

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

this Agreement.

 

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

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

qualifications, experience and skills. 

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

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

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

as a result of a Change in Control). 

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

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

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

representatives, successors and assigns.

 

12.           Change in Control.

 

(a)           Unless he elects to terminate this

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

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

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

hereunder.

 

(b)           In the event of a pending Change in

Control wherein the Employee has not received written notice at least fifteen (15)

business days prior to the anticipated closing date of the transaction giving

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

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

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

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

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

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

severance payment due to Employee shall be five (5) times the sum of Employee’s

annual salary plus maximum bonus opportunity in effect immediately prior to the

Change in Control and the non-competition provisions of Section 3 shall not

apply whatsoever.  Payment shall be made

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

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

 

(c)           In any Change in Control situation in

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

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

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

 

9

 

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 five times the sum of Employee’s annual salary plus maximum

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

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

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

of written notice by Employee.

 

(d)           For purposes of applying Section 5

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

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

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

compensation, reimbursements and lump-sum payments due Employee must be paid in

full by the Company at such time. 

Further, Employee will be given sufficient time in order to comply with

the Securities and Exchange Commission’s regulations to elect whether to

exercise and sell all or any of his vested options to purchase Common Stock of

the Company, including any options with accelerated vesting under the

provisions of the Company’s stock option or similar plan, as amended or any

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

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

to the Change in Control, if he so desires.

 

(e)           A

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

 

(i)            any person, other than the Company

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

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

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

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

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

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

 

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

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

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

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

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

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

office (such directors becoming “Additional Original Directors” immediately following

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

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

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

Directors and Additional Original Directors then still in office (such

directors also becoming “Additional Original Directors” immediately following

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

of the Board of Directors of the Company;

 

(iii)          the consummation of a merger,

consolidation, recapitalization or reorganization of the Company, a reverse

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

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

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

 

10

 

least 75% of the

outstanding voting securities of the Company immediately prior to the

transaction, with the voting power of each such continuing holder relative to

other such continuing holders not substantially altered in the transaction; or

 

(iv)          the consummation of a complete

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

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

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

subsidiaries)).

 

(f)    Continuation of Benefits.  (i) Following the termination of the

Executive’s employment in connection with a Change in Control (as contemplated

by Section 12(b) or 12(c) of this Agreement) (a “Change in Control

Termination”) and until the earlier of (A) three (3) years following such

Change in Control Termination or (B) the date on which the Executive becomes

employed by a new employer (other than to the successor to the Company

following such Change in Control), the Company shall, at its expense, provide

the Executive with medical, dental, life insurance, disability and accidental

death and dismemberment benefits (“Insurance Benefits”) at the highest level

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

however, if the Executive becomes employed by a new employer that maintains

Insurance Benefits that either (x) do not cover the Executive with respect to a

pre-existing condition that was covered under the Company’s Insurance Benefits,

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

not provide for a certain benefit, the Executive’s coverage under the Company’s

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

described in (x), (y) or (z), as applicable), without limitation, until the

earlier of the end of the applicable period of non-coverage under the new

employer’s Insurance Benefits or the third anniversary of the Change in

Control.

 

(ii) Following a

Change in Control Termination the special benefit allowance of $15,000

contemplated by Section 2(c)(x) of this Agreement will continue for 3

years thereafter.

 

(iii) The Company

shall reimburse all reasonable expenses incurred by the Executive for

reasonable office and secretarial expenses and for reasonable professional

outplacement services by qualified consultants selected by the Executive for up

to 3 years after a Change in Control Termination.

 

(iv) The Executive

shall not be required to seek other employment following a Change in Control

Termination and any compensation earned from other employment shall not reduce

the amounts otherwise payable under this Agreement.

 

(g)           If any portion of the severance

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

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

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

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

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

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

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

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

 

11

 

such other

severance benefits, Change in Control benefits or any other payments under this

Agreement) in an amount such that the net amount of Total Payments and Gross-up

Payment retained by the Employee, after the calculation and deduction of all

Excise Tax on the Total Payments and all federal, state and local income tax,

employment tax and Excise Tax on the Gross-up Payment, shall be equal to the

Total Payments.

 

For purposes of this Section Employee’s applicable

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

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

from receipt of the Gross-Up Payment.

 

All determinations

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

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

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

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

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

detailed supporting calculations both to the Company and Employee within twenty

business days of the receipt of notice from Employee that there will likely be

a Change in Control, or such earlier time as is requested by the Company.  In the event that the Accounting Firm is

serving as accountant or auditor for the party effecting the Change in Control

or is otherwise unavailable, Employee (together with all other employees with

comparable appointment rights in their respective employment agreements such

that all such employees may collectively select a single accounting firm) may

appoint another nationally recognized accounting firm to make the

determinations required hereunder (which accounting firm shall then be referred

to as the Accounting Firm hereunder). 

All fees and expenses of the Accounting Firm with respect to such

determinations described above shall be borne solely by the Company.

 

Employee agrees (unless requested otherwise by the

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

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

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

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

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

contesting such determination.  In the

event the Internal Revenue Service or any court of competent jurisdiction

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

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

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

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

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

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

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

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

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

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

Additional Excise Tax.

 

(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.

 

12

 

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 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: 

  Chairman

  
	

   

  	

   

  
	

  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:

  	

  Ed H. Bowman, Jr.

  
	

   

  	

  3102 Drexel Drive

  
	

   

  	

  Dallas, Texas 75205

  

 

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

 

13

 

intended in any way to describe, interpret, define or

limit the extent or intent of the Agreement or of any part hereof.

 

16.           Arbitration.  Any unresolved dispute or controversy

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

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

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

Arbitration Association then in effect. 

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

modify any provision hereof nor to award punitive damages to any injured

party.  The arbitrators shall have the

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

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

including those incurred to enforce this Agreement, and interest thereon in the

event the arbitrators determine that Employee was terminated without disability

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

Company has otherwise materially breached this Agreement.  A decision by a majority of the arbitration

panel shall be final and binding. 

Judgment may be entered on the arbitrators’ award in any court having

jurisdiction.  The costs of any

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

such proceeding as determined by the arbitrators.  This Section shall survive any termination of this Agreement.

 

[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/ Ed H. Bowman, Jr.

  
	

   

  	

  Ed H. Bowman, Jr.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SOURCECORP,  INCORPORATED

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Thomas C. Walker

  
	

   

  	

  Title:

  	

  Chairman and Chief Development Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  SOURCECORP Management,

  L.P.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By: SRCP  Management,

  Inc.,

  
	

   

  	

   

  	

  General Partner

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

  By:

  	

  /s/ Thomas C. Walker

  
	

   

  	

   

  	

  Title:

  	

  Chairman

  
					

 

15

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